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Why Is Citi Helping Big Tech Storm Wall Street?

Brian Chappatta
·4 min read

(Bloomberg Opinion) -- Alphabet Inc.’s deeper dive into the U.S. financial system shouldn’t come as much of a surprise. Technology giants have found a way into all corners of people’s lives; the latest plan to offer consumers new forms of bank accounts is simply one of the final frontiers.

The puzzling part of Alphabet’s expansion of Google Pay is why Citigroup Inc. is a willing participant in Silicon Valley’s invasion of Wall Street’s turf.

Last week, Bloomberg News and others reported that Citigroup and a California credit union were Alphabet’s initial partners for a venture that would offer checking accounts through Google Pay. The official announcement on Wednesday revealed that 11 banks and credit unions will offer “plex accounts” starting next year. Citigroup, with more than $1.6 trillion in assets, is by far the headliner of the group, which includes some minority-owned depository banks. The next-closest is Bank of Montreal, which ranks 19th among insured U.S. chartered commercial banks with about one-tenth of Citi’s assets (though a more comparable number of branches across the U.S.).

Jane Fraser, who heads Citigroup’s global consumer banking division and is set to take over as chief executive officer in February, said in a statement that “we want to make managing money simpler, smarter, more rewarding and more mobile and the Citi Plex Account will do that.” She talked up “unlocking the power of our respective ecosystems” to “serve an exponentially larger and new generation of customers.”

That all sounds fine in theory. But the partnership comes off as strange when looking at how Citigroup describes using the Zelle payments service through the bank’s own mobile app. It promotes the ability to “do it all from one location,” meaning “there’s no need to use a third-party app or have your financial information in multiple places.” Citigroup also highlights that “your money is protected using advanced technology to protect against fraud.”

Both of these points from Citigroup might as well be a direct argument against handing over financial information to a tech giant like Alphabet.

Reporting from Bloomberg’s Jenny Surane last week suggests that Google teamed up with Citigroup specifically because the bank has worked to build out its digital offerings over the past year. Citigroup sees the agreement as “complementing our continued investments in digital,” according to a company statement. Still, at first glance, it hard not to see this as an attempted shortcut to reach younger Americans who prioritize convenience above all else rather than working to further improve its mobile offering and continuing to market digital bank accounts to existing card customers.

“People do almost everything on their phones today, but for many, the way they save, pay and engage with their bank has remained unchanged,” Caesar Sengupta, general manager of payments at Google, wrote in a blog post. That’s simply not the case anymore for the largest U.S. banks, which for years have pushed more customers to their phones to deposit checks, view monthly statements and send and receive payments. Even Goldman Sachs Group Inc. has joined the digital consumer-banking game, realizing it doesn’t need physical branches to compete.

This partnership may very well pay off for Citi, though I can’t help but wonder if financial information and transactions are still viewed by many as too sensitive to give up to Big Tech. (“Google Pay will never sell your data to third parties or share your transaction history with the rest of Google for targeting ads,” according to the blog post.)

It will be worth watching whether JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., the three U.S. banks with more assets than Citigroup, hold their ground and avoid teaming up with technology companies. If the revamped Google Pay is a huge success, they may have little choice but join in or else get shut out. For now, though, these megabanks will probably keep going it alone. And they might even use Citigroup’s own arguments against it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.

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