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Hurdles Facing the Google Checking Account

  • Google's checking account could falter but it would be wise to avoid stumbling out of the gate by falling prey to political activism.

  • There's lessons to be learned from Facebook's Libra debacle.

In the Terminator series, Sarah Connor warned humanity of an impending apocalypse. Similarly, commentators have for years predicted that tech companies would one day encroach on the domain of banks.

And as dire predictions came true in the movies, so have those in the financial industry with Google’s announcement of plans to offer checking accounts.

I took the news with a hint of skepticism. After reciting the potential hurdles to myself out loud, I collected my thoughts and jotted down the list. Here's the big one.

Libra Lessons

To say Facebook underestimated the regulatory backlash against Libra would be putting it mildly. The resistance was swift and severe, with both France and Germany vowing to block it. Senators in the US encouraged Visa and MasterCard to steer clear which the companies smartly did. Eventually all payment processors recused themselves from the project.

Google may encounter similar resistance. Not in the sense of licensing but from the political front. As the U.S. presidential elections loom, talk of breaking up big tech has become a popular campaign promise. Democratic candidate Elizabeth Warren has promised to do just that. In a blog post entitled “Here’s how we can break up Big Tech”, she argued that these companies have too much power over the economy and smother competitors and innovation as a result.

Warren is not kind to Google, even claiming that she would undo previous deals the search giant made. These include traffic navigation app Waze, hardware maker Nest and advertising platform DoubleClick. The latter speaks to the impact of this decision as the company raked in $116 billion in ad revenue in 2018.

While this checking account may not have immediate implications on competition, it’s not far fetched to assume that the customer spending data would feed other Google businesses, thereby strengthening their market lead and bolstering resistance.

Though Warren is not a front-runner for the Democratic nomination, resistance against Google is not predicated on her electoral victory. The company is already under the microscope. In September, 50 U.S. states and territories announced an antitrust investigation.

The company’s deal to acquire wearable technology maker Fitbit raised similar antitrust and privacy issues. Congressman David Cicilline who chairs the House antitrust committee, encouraged the Department of Justice and Federal Trade Commission to scrutinize the deal on the grounds that it would “entrench its monopoly power online”. He also accused the company of hubris for pursuing the deal while under investigation. Senator Mark Warner joined the Congressman with pleas to investigate the transaction.

The Point Is

It’s not to say that Google should stand pat and coast with existing offerings. Quite the opposite; the company has a great track record for innovation. After all, its world-class search engine has crossed into the realm of ubiquity by becoming a verb.

Rather, it should take lessons from the Libra debacle since the chips are stacked against it in the court of public sentiment. In the current environment of heightened scrutiny of big tech and privacy concerns, the need for dialogue with decision makers prior to announcing major initiatives such as this one is more important than ever. There’s genuine concern with the power that big tech has accumulated and though it’s impossible to address all fears, an openness to dialogue would nevertheless go far.

The proposed checking account could falter and eventually disappear. Google would be wise to avoid stumbling out of the gate by falling prey to the climate of regulatory and political activism.

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