Google is overhauling its Pay app to be a one-stop shop for your financial life — and teaming up with Citi and other banks to do it

  • Google is redesigning Google Pay to include new budgeting tools and embedded checking accounts with banking partners like Citi.
  • Google Pay's strategy in the US closely mirrors that in markets like India, where Google Pay is more than a mobile wallet.
  • Mobile wallets are on the rise in the US, with players like Apple, Google, Samsung, and PayPal all competing for "top of wallet" status.
  • Visit Business Insider's homepage for more stories.

Mobile wallets are a dime a dozen in fintech. And as consumer adoption of touchless payments has increased during the coronavirus pandemic, so has competition among players like Apple, Google, Samsung, and PayPal.

They're all chasing "top of wallet" status, meaning they want to be the go-to app that consumers open at checkout. And Google is redesigning its Google Pay app to do just that. 

Google is adding a suite of new functionalities to its app. Building on its existing peer-to-peer transfer product, users can now split payments between groups. The app has money-management functionality where users can link bank accounts and credit cards to track spending.

"As users choose to connect their bank accounts or their credit cards or any other data sources into this, the ability to get a holistic view of where your money is going we think will really appeal to users," Caesar Sengupta, GM and VP of payments at Google, told Business Insider.

In 2021, Google is also rolling out checking accounts that can be opened and managed in-app. Called Plex accounts, Google is offering users the ability to open and manage a new checking account through partnerships with 11 banks and credit unions: Citi, Bank Mobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank, Green Dot, Seattle Bank, SEFCU, Stanford Federal Credit Union and The Harbor Bank of Maryland.

Read more: Smaller banks have been forced to evolve in the wake of the pandemic. Insiders explain how fintechs are playing a key role in the future plans of regional and community banks.

Citi and Stanford Federal Credit Union will be the first banks to go live with Plex accounts, opening up their wait lists this week.

"It's reimagining banking in the US, bringing the best of a bank and a technology company in the right way with a fully regulated compliant account, with all of the amazing features of a technology company added to it," Alpesh Chokshi, head of business development for Citi's global consumer bank, told Business Insider.

Citi's partnership with Google is 'tailor made' for the bank's retail strategy

Google's plans to integrate banking into Google Pay have been floating around for some time. Sengupta said as much in an interview with the Wall Street Journal in 2019. Google Pay's banking integration could help it stand apart from other mobile wallets in the US market. 

And for Citi, partnering with Google will build on its digital-forward strategy when it comes to retail banking.

"This partnership is tailor-made for our strategy," Chokshi said. "For our retail bank in the US, it's a light physical, heavy digital strategy, scaling through partnerships."

Read more: Citi's CFO says the bank is shrinking its office footprint and moving people to lower-cost locations to help keep expenses in check

Citi only has 700 branches in just six US cities, which means that its primary distribution channel has been digital.

"We see this as a really key lever to grow our banking franchise and scale it by accessing Google's channels and its customers, and getting all the features from Google Pay integrated with the bank account," Chokshi said.

The Plex accounts come with digitally-issued Mastercard debit cards (users can request physical debit cards as well). There are no overdraft or minimum balance fees.

Citi is expecting the Plex account to resonate not only with new customers, but its existing 70 million credit-card customers who don't currently bank with Citi. Beyond all the traditional features, the Plex account is integrated with Google Pay's other products, like rewards and spending insights. 

Plex account has all the core features of a Citi checking account, but is "enriched substantially" by being part of GPay, Chokshi said. 

"The integration with the merchants, integration with Gmail if you're interested, the offers and rewards, and all the artificial intelligence insights, all that is very new," Chokshi said.

The smaller banks partnering with Google will also likely see their reach expand beyond their local geographies. Community banks, particularly, are increasingly turning to digital channels and partner banking strategies to grow beyond local deposits.

The app will feature new spend tracking and insights

The new app will feature three tabs: Explore, Pay, and Insights. Users are able to pay businesses and peers, as well as earn rewards and track spending. 

Transactions are organized by relationships, be it with peers, groups of friends, or retailers. And transaction histories are designed like chat windows. While Google Pay already offers peer-to-peer payments, users can now set up groups to automatically split a bill with friends. Google is also working with a growing network of gas stations and restaurants so users can order food and pay for gas through the app. 

Google Pay will have three tabs: Explore, Pay, and InsightsGoogleIf users choose, Google Pay can link in with other Google products, creating automated and searchable functionality, primarily through the Insights tab.

"Our belief is that we create the best experiences when we bring Google's UX and tech, and combine it with the regulatory and the financial expertise of our banking partners," Sengupta said. 

Read more: Inside tech salaries at payment companies, where most engineering roles at Amex, Mastercard, PayPal, Square, and Visa are in the six-figures

Users have the ability to link Google Pay to Gmail and Google Photos, for example, to track and categorize spending. When users take a photo of a receipt or receive one via email, those transactions are searchable and integrated into the Insights tab. Users can search for terms like "shirt" or "Mexican food," and the Insights tab will use receipt data to automatically highlight relevant purchases.

"We're benefiting from years of investment at Google in computer vision and OCR to be able to make that type of search really differentiated," Josh Woodward, director of product management for Google Pay US told Business Insider.

These sharing settings are off by default, Woodward said. But users can enable them if they are looking for that kind of search functionality. Otherwise, transactions are sorted by relationships with merchants, friends, and groups. 

The transaction and spending data stored in Google Pay aren't shared, not even with other Google products, Woodward said.

"We know when it comes to money, security and privacy is absolutely paramount," Sengupta said. "So we leaned in massively here to make sure that users feel safe and secure, but also that privacy is something that is completely in their control."

Google is looking to Asia as a blueprint for what's to come in the US

Both Google and Citi say that the new Google Pay was largely inspired by the firms' experiences in markets like India, China, and Singapore. These markets are often characterized as "mobile first," meaning consumers first adopted technology through smartphones.

In those markets, many consumers manage their financial lives through smartphones. Companies like Paytm, Alipay, and WeChat all offer payments, in addition to other services like online shopping and streaming.

"The insights we got that inspired us to do this really came from Asia," Citi's Chokshi said. "As a global bank, we have a large presence in Asia and we've enabled many of our services inside Alipay and WeChat Pay. And we've had great success with that."

Read more: Community banks are facing an 'existential threat' as they lose the battle for tech talent. Here's how they're getting creative to lure developers and engineers.

For Citi, offering a full-fledged banking product embedded in an app that consumers use everyday is a differentiated offering in the US market. 

"We're excited by the power of that," Chokshi said. "We think it's relatively unique to the US, and it's quite different, we believe, from an Apple Pay or PayPal or others."

"Those are all fantastic products, and we respect all of them," Chokshi added, "but this is just very different. It's not a pass through wallet."

Google Pay has seen massive success in markets like India, where it's one of the leading mobile payments platforms. 

"This is the start. In terms of the journey around money, there's a long way to go in the US," Sengupta said. 

Compared to markets like China or India, the US is lagging in terms of mobile payment adoption. An estimated 30% of smartphone users in the US used a mobile wallet in 2019, according to eMarketer. Last year, eMarketer predicted that mobile payment volumes would more than double by 2023. Though the impact of the coronavirus pandemic could accelerate that adoption.

"In China or India or Singapore, we've seen these trends happen very quickly," Sengupta said. "In the US, we're starting to see some of those trends happen, and COVID-19 has certainly accelerated them. So we're very excited to see what happens over the next four or five years as we keep making the product better and better for our users."

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