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Will Google’s transaction accounts disrupt CBA, NAB and ANZ next year?

Banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) could face disruption if Google launches transaction accounts.

Overseas media like CNBC is reporting that Alphabet’s Google is getting into banking with the tech business set to offer transaction accounts next year.

Under the code name ‘Cache’, Google is partnering with financial institutions including Citigroup.

Google Pay has been going for a while and has proven quite successful but this would be another step for Google to control more of the payment process.

At the moment the focus is in the US, a Google statement said “We’re exploring how we can partner with banks and credit unions in the US to offer smart checking accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools, while keeping their money in an FDIC or NCUA-insured account.”

It seems Google plans to brand the transaction accounts with the financial institution’s name rather than its own. So it’s not like Google is going to be promoting ‘Google Bank’ any time soon, but it shows that Google is increasingly encroaching on the bank’s turf.

Our banks were hesitant to offer Apple Pay as a service, but now it’s proudly advertised as a feature by Commonwealth Bank and others.

Foolish takeaway

Our Australian banks earn a vast majority of their profit from lending, particularly mortgages. So it’s not as though Google is thinking about Australia yet and certainly isn’t going to enter the mortgage market.

But it could put a bit more pressure on bank profits in the longer-term at a time when the net interest margins (NIM) are being squeezed.

I don’t think it’s possible to rely on the big banks for earnings growth or reliable dividends, I’d much rather invest my money into these dividend shares.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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