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Google-Citi partnership stirs data privacy concerns

In the wake of Google’s announcement that it will partner with Citigroup and a Silicon Valley credit union to offer U.S. checking accounts, one big unanswered question concerns how customers’ transaction data will be used.

It’s a question that could resonate not only with wary consumers, but also with banks that are worried about big tech’s ambitions in financial services, as well as lawmakers and regulators concerned about the tech industry’s growing reach.

Google operates the world’s largest advertising platform, generating $116 billion in ad revenue last year alone. This empire was built on the search giant’s vast array of consumer data, which allows advertisers to target potential customers with tremendous precision.

Because checking account data reveals how consumers spend their money on a day-to-day basis, it has obvious value to Google. But the Mountain View, Calif.-based company was close-lipped Wednesday about how it plans to use such information.

Google did pledge not to sell checking account users’ financial data. The company also said that it does not currently use data from its mobile wallet, Google Pay, for advertising purposes.

But the company would not say Wednesday whether that Google Pay policy will continue when the new checking accounts launch sometime around the middle of next year. Google plans to offer the accounts through Google Pay.

Through a spokesman, Google did say that it recognizes financial information is more sensitive than other kinds of data. The company also stated that it will be working to ensure that account holders remain in control, and that rigorous standards for privacy and security are upheld.

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The Google accounts are expected to be cobranded by either Citi or Stanford Federal Credit Union, depending on the preferences of specific applicants, and whether they are eligible to open an account at the $3 billion-asset credit union, which serves people affiliated with Stanford University and various companies in Silicon Valley.

A source familiar with Citi’s thinking said that the checking accounts’ terms and conditions will govern what kind of data Google can view. The same point was made by Joan Opp, the president and CEO of Stanford Federal Credit Union.

“The data for that shared account will flow,” Opp said, “but only for that shared account.”

The mobile-based checking accounts seem likely to appeal to the same kind of tech-savvy consumers who have signed up for Apple’s recently released credit card. Google said that the accounts will include budgeting tools, though specific product features appear still to be under development.

But U.S. consumers have grown more wary of tech companies’ use of personal data, said Brian Foran, an analyst at Autonomous Research.

“Three years ago, if a big tech company launched a checking account, the average consumer would think, ‘They’re going to make banking cool and easy,' " he said. “Today, more consumers think, ‘What creepy things are they going to do with my data?’ ”

Before Wednesday’s announcement, Google had made fewer waves in U.S. financial services than Facebook, another digital advertising giant that set off an intense backlash when it announced the Libra cryptocurrency in June. Google, which is a subsidiary of Alphabet Inc., launched its mobile wallet in 2015, but has focused more on growth in India than in the U.S.

The partnership with Citi figures to bolster Google’s core advertising business, said Aubrey Hawes, senior director for Oracle’s financial services global business unit.

“If you look at something like a pair of shoes,” he said, “a lot of times those ads will follow you around, even if you may have purchased that item.”

“I think the piece here is, once you purchase that item through the account you have through Citi, they should be able to have better transparency to see that, so that the consumer doesn’t see that ad again,” Hawes added. “The original ad is no longer relevant. It makes their ad machine that much smarter.”

Google is generally better positioned than banks to use transaction data effectively, said Bruce VanDiver, a partner at the consulting firm Capco. “That is a core competency of big tech, and it’s not a core competency of banks.”

The checking accounts could be a first step toward offering a broader suite of financial products through Google Pay in partnership with banks, VanDiver added.

“If you can get someone to use your card or digital wallet, then you’re front and center, and you have an entry point into other products and cross-sell opportunities,” he said. “So what’s next? Are we going to see wealth products? Access to brokerage accounts through a digital wallet?”

Within hours of Google’s announcement on Wednesday, industry analysts were speculating that the partnership may draw scrutiny on Capitol Hill.

“We see material political and regulatory risk with this effort and question whether the trouble it is likely to cause in Washington could be worth the upside to the financial institutions or Google,” Jaret Seiberg, an analyst at Cowen Washington Research Group, wrote in a research note.

“Much like Facebook, the issue for Google will be whether consumer data stays private.”

Seiberg said while that he does not expect regulators to block Google and Citi from launching the new checking product, he believes that congressional hearings on the partnership are likely to be held as soon as next month.

Andy Peters and Will Hernandez contributed to this story.

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