Why Samsung is following Apple, Google into consumer banking

Samsung’s plan to launch a U.S. debit card this summer is the latest reminder that the tech industry has its sights set on consumers’ banking relationships.

The South Korean mobile phone maker is following the lead of Apple, which launched a credit card last summer, and Google, which has announced plans to start offering checking accounts later this year.

Like its Silicon Valley-based competitors, Samsung is positioning its forthcoming deposit account as part of a money management platform for consumers’ cellphones. In a blog post announcing the new product, Samsung referred obliquely to how the coronavirus pandemic has changed consumers’ spending behavior.

Bloomberg

“Now more than ever, people are counting on technology to help them make contactless payments, shop and manage their finances without leaving the house,” wrote Sang Ahn, vice president and general manager of Samsung Pay.

He predicted that mobile financial services and money management tools will continue to play a bigger role in consumers’ daily lives.

Samsung’s debit card, which will be offered in conjunction with SoFi, will be backed by a cash management account. The San Francisco-based fintech already offers a cash management account known as SoFi Money, which relies on bank partnerships to offer deposit insurance.

Samsung declined an interview request Friday from American Banker but said that more details will be made available in the coming weeks. SoFi also declined to provide additional information.

In one key way, Samsung’s path to consumer banking resembles Google’s approach. Like the Mountain View, Calif.-based search giant, Samsung is targeting the consumer’s primary account, the one in which their paychecks typically get deposited. In contrast, Apple offers a credit card.

But in another way, Samsung is following Apple’s lead. Like the iPhone maker, which has partnered with Goldman Sachs on the Apple Card, Samsung is working with a single financial institution. Google, on the other hand, has signaled that it is open to partnering with numerous banks and credit unions. Last year the tech giant announced an alliance with Stanford Federal Credit Union.

Apple, Google and Samsung are all giants in the mobile phone business, and all three firms are seeking to capitalize on the rise of digital payments. Remote card payments in the U.S. grew by 20.5% a year between 2015 and 2018, compared with an annual growth rate of 5.8% for in-person card payments, according to Federal Reserve data.

“I think all of these companies see the need for a smart digital twin to the dumb plastic,” said Vaduvur Bharghavan, the CEO of Ondot Systems, which provides mobile phone-based technology to banks and credit unions. “Some of these might succeed, and some of these might fail. But I don’t think this is a fad.”

Unlike Google, Samsung does not have a massive digital advertising business that might use individuals’ spending data to target ads more effectively. But consumers who start using Samsung debit cards as their primary payment method might be less likely to buy their next mobile phone from another company.

Bradley Leimer, a fintech adviser who was formerly the head of innovation at Santander U.S., expressed skepticism about the partnership between Samsung and SoFi.

He argued that Samsung would have benefited from pairing up with the maker of a mobile banking app that has gotten more traction in the marketplace than SoFi has to date. “Honestly I don’t really get the combination,” Leimer said.