Google’s checking account is setting up a showdown with Apple over the future of financial services

Lost in the news that Google will offer a checking account next year is the implication it has for one of the fiercest rivalries in the tech world.

The two dominant operating systems for mobile phones — those supercomputers most of us carry around all day — are Apple’s iOS and Google’s Android, which together run most of the planet’s 3 billion-plus smartphone devices.

Google signed a deal last month with Citigroup to develop a checking account that will be linked to Google Pay as early as next year, according to a source with knowledge of the discussions. Apple launched its first iPhone-integrated credit card with Goldman Sachs in August.

While the starting points are different, both are new consumer finance products linked to digital wallets embedded in respective Apple or Android phones. Whether it’s Apple Pay or Google Pay, the real battle will be to keep users locked into ever-growing payments ecosystems. Doing so will help the tech giants capture more of the fees and information now being given up to banks and fintech startups.

“Everyone wants the payment to happen through their device, because if it’s effortless it will entrench you in their ecosystem,” said Gerard du Toit, banking consultant at Bain. “The information is valuable for Google in particular; if they are able to connect a specific purchase to advertising, there’s immense value in that.”

Like the Apple Card, the Google account — referred to as a “smart checking account” by the search giant — will come with budgeting tools, the company said in a statement.

“We’re exploring how we can partner with banks and credit unions in the U.S. 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,” a company spokesman said in a statement. “We look forward to sharing more details in the coming months.”

The move is likely just the first for these tech giants as they take a “land and expand” strategy, and future products such as Google co-branded credit cards or Apple checking accounts are all possible, du Toit said.

It’s part of a larger push that has seen tech giants take on industry after industry — from media to financial services to health care — in search of growth and to protect existing businesses.

But regulators have woken to the risks in terms of data security posed by the expansion of tech giants into new frontiers. In fact, Google’s partnership with the second-biggest U.S. health system has drawn a federal inquiry into how sensitive data on 50 million Americans will be protected.

It’s also part of a larger global battle that is coming. Asian tech giants such as Alibaba and Tencent have already become juggernauts in payments thanks to their mobile apps. Mobility players such as Grab in Southeast Asia and Uber in the U.S. have also pushed into financial services.

With the recent waves of scrutiny faced by Big Tech, “it wasn’t surprising that the Citi brand will be used” instead of Google’s, according to banking analyst Brian Foran with Autonomous Research. The Wall Street Journal reported that detail, as well as the project’s code name: Cache. 

“They’ll have this window into my financial life, they’ll see my paycheck, my spending habits, mortgage payments, credit cards,” Foran said. “I’m not sure I’d feel comfortable with a Google bank account.”

Google will likely have to offer incentives to entice users to sign up for the Citigroup accounts, such as discounted phones or mobile service, according to an industry insider familiar with co-brand deals.