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The Benefits Of The Google-Citigroup Connection

Nov. 17, 2019 11:22 PM ETCitigroup Inc. (C), GOOGL, GOOG12 Comments
John M. Mason profile picture
John M. Mason


  • The connection will provide Citigroup an opportunity to grow its retail deposit base - something it has been trying to do to catch up with competitors.
  • It will provide Google with the opportunity to substantially expand its advertising dominance into other markets.
  • The combination provides an example of how new opportunities are opening up both in "legacy" industries and in industries related to "big tech" - opportunities that will change the world.

I have already taken a position on the movement by Google (NASDAQ:GOOGL) to offer smart checking accounts in partnership with Citigroup, Inc. (NYSE:C) through Google Pay. I find this combination very interesting, presenting us with the opportunity to move banking towards the future.

Robert Armstrong, writing in the Financial Times, provides a little more insight into the transaction.

“Silicon Valley has already cracked payments. It is only a matter of time before it overturns more complex banking functions.”

But, Mr. Armstrong goes on.

“Fundamentally, a bank is a balance sheet, a data-processing system and a sales force.”

And he then adds...

Silicon Valley companies (Google) may be content to leave the balance sheet, the most heavily regulated bit, to the banks.”

... Concluding:

“But, they are coming for the other parts.”

How do the two sides justify this combination?

From the banking side, Mr. Armstrong presents the following argument. Citi, he argues, seems to be willing to move in this direction because of its drive to increase its deposit base.

“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 one-quarter of Bank of America’s (NYSE: BAC), for example.”

“Citi has been trying, with some success, to increase deposits nationwide...”

But this road to more retail deposits has been difficult and expensive.

The partnership, Mr. Armstrong argues, “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.”

But this effort will not be an isolated one within the Citi environment.

“In Asia, partnerships with tech companies are already a key part of (Citi’s) retail operations. In mainland China, the bank says, 90 percent of its customers use WeChat to complete everyday banking

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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