Why Is Every Tech Company A Bank These Days?

A few weeks ago, Crunchbase News explored startups diving into the world of banking. A horde of young tech companies in related spaces—like student loans or low-income savings—are adding checking accounts and debit cards to their arsenals. The result is a growing cohort of startups pushing banking-like services on consumers in hopes of adding revenue to their extant userbases.

They are not alone, however.

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Today news broke that Google, an online search giant and mobile hardware aspirant, is joining the mix. Yes, it’s not just Chime and Acorns and Wealthfront and Betterment and Robinhood and Venmo and SoFi and Uber. Banking now also encompasses Mountain View.

As the Wall Street Journal wrote:

Google will soon offer checking accounts to consumers, becoming the latest Silicon Valley heavyweight to push into finance. […] Google is setting its sights fairly low. Checking accounts are a commoditized product, and people don’t switch very often. But they contain a treasure trove of information, including how much money people make, where they shop and what bills they pay.

The story goes on to note that Google won’t “sell checking-account users’ financial data.” (Fellow technology giants Twitter and Facebook have apologized in recent months for using certain consumer information for ad targeting that was provided for security purposes; Google itself has a history of adding more information to its ad algorithms over time.) That point matters for both attracting customers (who, presumably, would rather their financial data remain private), and generating revenue (Google could resort to the sort of fees that some banks use to monetize checking accounts).

Two quick points. First, the trend of tech companies adding banking features is spreading more widely than we expected. We should have thought bigger.

Second, a trend that I’ve kept tabs on for about a half-decade is continuing. Back in 2014, I wrote about how major tech giants were working to expand their product lines horizontally, that the most valuable tech shops were offering an increasingly broad array of products far from their core offerings.

Quoting briefly from that piece, here’s how I described the situation in light of a then-current Apple product decision:

Apple’s aggressive product expansion is hardly shocking. Along with the other platform companies, it is building a wider and more diverse set of offerings: If a product, program or service can run on Apple’s platform, it wants to build it in-house.

You can see this plainly in the case of cloud storage. Google, Amazon, Microsoft and, now, Apple all offer consumer-facing cloud storage, for example. They can bake it into their web products (Google) or their operating system and productivity apps (Microsoft) or use it to drive their device experience (Apple).

You can see the analogy between that point and Google moving into checking accounts.  We’re seeing the collision of big tech’s platform push and the startup trend of adding checking accounts and debit cards.

Understanding what the giants might get out of a banking push isn’t clear. For startups, the move seems to be a simple focus on revenue and juicing more long-term value from already-acquired customers. What might Google get out of the same effort? I would have said data for targeting and the like, but as we’ve seen, Google doesn’t intend to roll in that direction. If checking accounts can generate enough revenue to be material to Google isn’t clear.

Illustration: Li-Anne Dias.