By Ray Birch
SAN CARLOS, Calif.—One payments expert says if credit unions don't study what happened with the checking account Google had planned to offer with a group of financial institutions, they will face some of the same issues the proposed Plex account encountered as they seek to get more aggressive in the in the digital products space.
As CUToday.info reported, the tech giant last year announced its Plex checking account pilot would not move to market.
“The problems Google ran into with Plex, if credit unions don’t learn from this, they will be doomed to repeat what happened with Google,” said Richard Crone, CEO of Crone Consulting.
And what is that lesson? According to Crone, the takeaways include just how challenging it is to open accounts digitally and instantly across other platforms, and that CUs must update their thinking on field of membership, if not their charters.
“The lesson of Goolge’s Plex account is you can't play at the edge of someone else's network, you can't play in digital count opening, unless you first offer digital account opening in your own mobile banking app,” explained Crone. “Google could not solve the digital account opening quandry.”
Citibank, which reported it had 400,000 customers lined up for the account, was among the 11 FIs in the pilot. State Employees FCU, Albany, N.Y., and Stanford FCU in Palo Alto, Calif., were the only credit unions participating in the pilot.
An ‘Important Lesson’
“There is an important lesson here for credit unions and that is they must update their thinking about FOM and common bonds as a part of their digital account opening (DAO) strategy, especially when opening accounts instantly through the online platforms of others, such as social networks, the fintechs and the like,” said Crone. “Google, and those piloting FIs, all grossly underestimated the effort to integrate with legacy core processors and mobile banking platforms.
“If a credit union can’t support DAO in their own mobile banking app, they are not going to be able to do it remotely on the edge of someone else’s network or platform such as Google Pay, Apple Pay, Samsung Pay, PayPal, Venmo, Facebook, Facebook Diem—or wherever consumers might wish to open an account instantly, especially in the exponentially growing market for buy-now pay-later at ecommerce sites,” continued Crone.
Richard Crone
Crone contended that most of the 11 publicly announced FIs in the pilot didn’t support DAO within their mobile banking app nor through their legacy core processor, including the two credit unions
“The Google Plex situation magnified the field of membership and definition of common bond issues for instant digital account opening and meeting membership qualification requirements,” said Crone. “Thus, all the challenges to Stanford Federal Credit Union and speculation that they might leverage Google as an existing select employee group to expand the common bond and FOM to include any user of Google’s services.”
CEO Responds
However, Stanford FCU CEO Joan Opp emphasized in comments to CUToday.info that her organization was not looking to expand its charter with Plex.
“We had no intention of attempting a charter that looked like that, so I am not sure whether it was a real possibility or not,” Opp told CUToday.info. “Our objective the entire time was to reach more members in our SEG targets—Stanford and the technology companies in Silicon Valley that we serve who have employees across the U.S.”
A Question That Can’t Be Googled
Crone also questions just how strongly Google was committed to launching Plex.
“Google has a history of floating ideas to surface market and possible government reaction without a formal release,” he said. “It is a shrewd fintech technique to test the reaction without committing.”
Crone asserted that what came to the surface with Google’s Plex account were the same fintech concerns for every disintermediating third-party app, that the Google Plex platform would control all the value-added functions and loyalty features of the customer experience.
Google’s Response
The Wall Street Journal earlier reported sources had told it that Bill Ready, who was leading the project at Google, was “concerned that Plex could make other banks think Google was out to compete with them since it played a lead role in building the product.”
A Google spokesperson told the Journal the company would shift its focus to “delivering digital enablement for banks and other financial services providers rather than us serving as the provider of these services.”
Analysts have suggested the reason Google dropped the project is it wants to provide cloud services to many of the largest banks and the competitive checking offering would have been a hindrance.