Headline November 28 2019/ '' ' GOOGLE -CiTi BANK- !GONGS! ' ''

'' ' GOOGLE -CiTi BANK- 

!GONGS! ' ''

CITIGROUP AND GOOGLE THIS WEEK announced a partnership that will ''offer smart checking accounts through Google Pay.'' What that means, exactly, remains vague : !WOW!

The idea seems to be that customers would enjoy a whizzy Google banking interface, backed by old-fashioned current account at Citi.

Given the history of the two institutions, and other recent attempts to mix West Coast tech with East Coast finance, it is tempting to conclude that that this venture - codenamed Cache - will hit trouble. But that would be too hasty.

Silicon Valley has already cracked payments. It is only a matter of time before it overturns more complex banking functions. Citi-Google could be a beachhead.

From Citi's point of view, the risk falls into two broad categories. The first we might call ''Libra risk'' - the chance that regulators see an oligopoly approaching the US financial system and reject the idea, as they have done with Facebook's proposed digital currency.

This phenomenon is not new : 20 years ago Walmart tried to get into retail banking. After 10 years of trying, and waves of regulatory and political uproar, the retailer raised a white flag.

Google is therefore wise to outsource the regulated bids of the business to Citi, and avail itself of the bank's experience with regulators. But there may still be noise about Google extending its monopoly power to finance.

The US BankHolding Company Act of 1956 was, after all, designed to keep banking and non-banking businesses separate, for fear a company would use its banking arm to to push consumers towards its core business.

That idea does not seem so far-fetched today. But the regulatory pressure is likely to be heaviest on matters of privacy. Citi will have to hope that consumers and regulators are prepared to accept Google's promises that personal information will be used only with consent.

Many column inches will be devoted to urging scepticism over that pledge. But experience suggests that if the service is good, customers and US politicians will ultimately prove docile.

The second big threat is ''Apple risk'' - a nod to the way Cupertino-based company tends to capture much of the value from its joint ventures.

Mobile carriers, for example, may have thought the new iPhone was a revenue and branding opportunity - but soon  found out that their brands would be invisible to iPhone users, and that Apple would insist on pricing, subsidies and revenue sharing arrangements that favored it and its customers.

Some analysts have argued the benefits of Apple's partnership with Goldman Sachs in credit cards are similarly weighted towards the tech group, as the card offers a relatively low interest rate and charges no fees.

Citi may be willing to take that risk because, compared with its megabank peers, it has a small physical footprint in the US - branches in just six big cities.

Citi's $186 billion of US retail deposits are just over a quarter of Bank of America's for example. Citi has been trying with some success, to increase deposits nationwide by offering online accounts at rates above 2 percent.

Most of Bank of America's deposits are interest free, or nearly so. All in BOA pays 0.8 percent for its deposit funding; Citi pays almost twice that. On a leveraged bank balance sheet, that is a huge difference, and it goes a long way towards explaining why it is Citi that ended up with Google.

The partnership may prove a cheaper way to gather deposits than the combination of channels Citi is trying now - even if Google, one way or another, takes a big cut. And Citi is not taking a shot in the dark : In Asia partnerships with tech companies are already a key part of of its retail operations.

In mainland China, it says, 90 percent of its customers use WeChat to complete everyday banking and credit card transactions.The details will matter of course. But the google partnership could be just what Citi needs, if both sides can quash concerns over privacy.

The Honor and Serving of the Latest Global Operational Research on Google, Citi and The Span in the Markets, continues. The World Students Society thanks author Robert Armstrong.

With respectful dedication to the Students, Professors and Teachers of the world. See Ya on The World Students Society - for every subject in the world - : wssciw.blogspot.com and Twitter - !E-WOW! - the Ecosystem 2011:

''' Positive Parleys '''

Good Night and God Bless

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