Google’s Checking Account: How Will It Make Money?

Google (GOOGL) intends to launch a checking account product next year in partnership with Citigroup (C). The underserved banking market presents a huge opportunity for Google. According to World Bank figures, 1.7 billion people around the world don’t have a bank account.

Google checking account product would appeal to younger people

Google’s product could strike a chord with millions of consumers when it launches. CNBC, citing a Bain study, reports consumers, particularly young people, are open to banking with big tech companies such as Google. Amazon (AMZN) has also explored offering a similar account product.

Google rules out selling people’s account transaction data

There is definitely demand for a Google bank account. Parent Alphabet saw its stock rise on reports that it plans to launch a checking account product, suggesting investors welcomed the news. However, Google has yet to discuss how exactly the checking account product will make it money.

Google executive Caesar Sengupta told The Wall Street Journal last week that Google had not made up its mind on charging checking account holders. Sengupta also said that Google would not sell its checking account customers’ data. Without elaborating, he stated that helping people do more stuff online would be good for Google.

Insights could power advertising business

Some experts believe Google could leverage insights from its checking accounts to strengthen its advertising business, without selling people’s data. Morgan Stanley analyst Betsy Graseck told Bloomberg that Google could use the insights to show advertisers how marketing on its platforms drives purchases.

Advertising is Google’s main revenue source, and contributed 84% of parent Alphabet’s total revenue in the third quarter. Although Google dominates the digital advertising market, it faces growing competition. For example, Amazon is eating into Google’s ad market share. Therefore, Google may want to find new ways to draw more advertisers to its platforms to counter competitors.

Going beyond advertising

As it looks to strengthen its advertising business, Google is also working to diversify its revenue sources outside advertising. The company has ventured into cloud computing, where it is one of the top three vendors, and into hardware, where it makes a range of devices, from smartphones to smart speakers. Google’s non-advertising revenue rose year-over-year to $6.4 billion in the third quarter from $4.6 billion. Offering a checking account product for a fee could open another non-advertising revenue source for Google.