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When you think of Google, Walgreens, or H&R Block, what comes to mind is probably searching the web, getting a prescription or paying taxes without writing checks, creating an emergency fund, or setting up automatic bill payments. But these companies are part of a growing trend of non-bank brands offering banking services.
Making banking services available offers retailers, brokers and other companies another way to interact with customers, with the goal of retaining and retaining those customers within their ecosystems for longer. For customers, it can mean convenience and a better technology experience, but also additional costs and potential confusion.
To be clear, these companies aren’t actually becoming banks. This would require obtaining a bank card, a process that can be lengthy and expensive and would subject the company to additional regulatory scrutiny, says Francisco Alvarez-Evangelista, a research associate at Aite Group, a financial services analysis firm. .
Instead, they are partnering with existing banks that are leased and regulated and offer federal insurance for customer deposits. Partner banks handle regulatory and security responsibilities and do the work of effectively managing checking, savings and other accounts, while companies focus on branding, marketing and customer engagement.
Non-bank banking offersGoogle
Introduced in late 2020 and slated for launch this year, the highly acclaimed “Plex” accounts are mobile checking and savings accounts directly integrated into the Google Pay app. Google is partnering with about 10 financial institutions, ranging from large national banks to regional banks and credit unions, and customers will be able to choose which account to open with.
Google’s broad reach and vast data collection capabilities may lead consumers to question whether or how the tech giant will use banking or transaction information from Plex accounts. But the company claims that such data is private.
“We take the privacy of financial information very seriously and have taken a privacy-friendly approach to Google Pay,” Josh Woodward, director of product management at Google Pay, said via email. “Google Pay does not sell your data to third parties or share your transaction history with the rest of Google for ad targeting.”
Walgreens
Walgreens announced in March that it will launch a bank account in the second half of 2021 in partnership with MetaBank. The pharmacy chain said in a press release that the account provided with a debit card and covered by Federal Deposit Insurance Corp. through MetaBank will complement its current services and improve its loyalty program and customer personalization. The company said customers will be able to sign up both in-store and online.
H&R block
The tax preparation chain has expanded the capabilities of the H&R Block Emerald Prepaid Mastercard account beyond just uploading tax refunds. Issued in partnership with MetaBank, the card allows customers to make purchases, receive direct deposits, share finances with a partner, withdraw cash, pay bills and perform other money management tasks. There are fees for some card services, such as reloading cash and making ATM withdrawals.
Potential advantages and disadvantages
These brand-backed accounts can interest consumers for several reasons. Between them:
If you already use Google Pay for purchases or the Walgreens app for prescription purchases and refills, for example, you can manage your bank accounts through an interface you’re used to. If you have an H&R Block card because a refund has been uploaded to it, you can manage more of your financial life through it. Bank apps and websites aren’t always very easy to use. More consumer-oriented businesses may be able to leverage their technical talents to create a better user experience than traditional banks.
There are also risks or potential drawbacks, including:
Costs. Registering a bank account because it’s integrated with an app you use means you may not be a comparison shopper. The interest, if any, on your deposits can be relatively low, or the fees you pay for the services can be relatively high. Interest rates are quite low right now, but there are still some institutions that can offer above-average rates. The partner bank. Your money is ultimately held by the partner bank and it is that bank’s policies and procedures that could determine whether the account meets your needs. When problems arise, you may be dealing with the bank’s customer service rather than the brand, which may not be the best experience.
Alvarez-Evangelista notes that it is in the interest of companies to partner with banks that provide good service. From a brand perspective, “the biggest risk is reputational,” he says. “If one of these programs fails or doesn’t meet consumer expectations, the retailer is associated with it.”
The article Google, Walgreens, and H&R Block Want to Be Your Bank originally appeared on NerdWallet.
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