This case study evaluates the partnership announced between Google and CitiBank in November of 2020 in relation to customer experience and strategic partnership and ecosystem collaboration. Is this the beginning of the end of traditional finance? Or just the beginning of something better?
In November 2020, CitiBank and Google announced a partnership where Citi accounts would be available through the Google ecosystem, and accessible through Google Pay. From traditional finance and tech companies to the press, there was no shortage of talking heads, waxing poetic about what this means for the future of the industry. Is the partnership desperate, or strategic? Is it the beginning of the end of traditional finance? Or the beginning of it’s second act?
To understand the tension as a result of this announcement, of course, you need to be aware of the larger trends and issues that traditional institutions like banking have been reckoning with for the past decade. The wave of FinTech startups has been biting at the heels of traditional finance for years, and they have one key advantage — being digitally native, and with it, more primed for seamless, digital customer experiences. For Citi to become embedded in Google’s system might give them accounts, but it would cost them ownership of the customer experience.
“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.”
The potential ‘invasion’ of Silicon Valley onto Wall Street turf has been a key strategic driver of banking in the past decade. In response to a growing competitor list of digitally native financial point solutions, more legacy banking institutions moved to capitalize on their innate strength — legacy branding, familiarity, and breadth of offerings. These institutions are in a rush to become the supermarket of financial services, creating partnerships and integrations — often with these digitally native point solutions — at every turn.
But among this rush to become more competitive, there’s been a tension; between sacrificing too much ownership and too many customer touchpoints, and not offering enough variety to compete with a patchwork of point solutions.
The truth is, this is a false dichotomy that does nothing to move either industry forward, and Citi has shown they’re aware of that with this partnership.
“We are no longer the financial supermarket of the past.”
If you stop looking at the divide between old and new finance you can start to see how smart Citi’s move was. Being a bank with only ~700 locations in the US — most of which were/are in large cities — Citi has made a move that allows them to jump right into the pockets of anyone with GooglePay — upwards of 150 million individuals.
It’s worth remembering here that it’s not the banking industry or fintech that decides who has advanced in the turf war — it’s the customer. And roughly a third of consumers would consider switching away from their current financial institution to a “provider whose core business isn’t banking, as long as the right features and functions were offered.”
In other words, the one thing that the customer truly cares about is the experience, and what type of experience is afforded by their provider. The age of the company, and its original industry, makes no difference to the consumer.
To many, still, the move was incredibly risky on the part of CitiBank; sacrificing complete ownership of the customer journey for the chance to meet customers at their touchpoint of preference.
But as we all know, great risk usually stands to receive a great reward.
And, if this partnership is successful, “this ecosystem would link payments, banking, identity and commerce credentials to a funding source that does something no other FinTech or Big Tech ecosystem has been able to do at scale: capture the consumer’s primary paycheck and use it as the flywheel to make funds movement between those various ecosystem endpoints seamless, trusted and secure.”
In other words — no bank is an island. Citi, at least in the near-term, would rather be a successful part of a dynamic ecosystem than fight a 50-front war.
“The account is a Citi product, but customers get the best of both worlds with the Google ecosystem... [the] traditional banking model is evolving.”
Only time will ultimately decide whether or not the CitiBank move paid off, let alone redefined an entire industry.
In Boomtown’s view, it doesn’t matter if Google Pay 2.0 is a success or failure. The strategy is inherently risk-adjusted for Citi. They get to offer a world-class, integrated customer experience right away, and with every week that passes they gain new access to a rapidly evolving new customer base.
While they’re at it, they get to learn from Google, without writing a single line of code. And they’ll even get the brand lift for offering a great customer experience that is built, delivered and maintained by Google. None of the value Citi seeks is dependent on the success or failure of Google Pay.
Eventually, every bank will have the choice that Citi had. Partner or go it alone?
Successful banks won’t get to make that choice until they decide if they’re going to put customer experience first. For what it’s worth, that’s not a lesson we learned from Silicon Valley. It’s a lesson we learned from banks a long, long time ago.