This year, two major tech companies entered the banking industry, but their brand strategies are vastly different.

Goldman Sachs CEO David Solomon praised Apple Card as "the most successful credit card launch ever," but Apple's ads call it "created by Apple, not a bank." Meanwhile, Google said it plans to launch checking accounts next year in partnership with Citibank and Stanford Federal Credit Union, and hopes to use a co-branded approach.

Google executive Caesar Sengupta told The Wall Street Journal: "Our approach is to work deeply with banks and the financial system. This may be a slightly longer path, but it is more sustainable."

The strategic differences between Apple and Google in their partnerships with Goldman Sachs and Citibank offer banks a choice: when partnering with tech giants entering financial services, should they stay behind the scenes or promote their own brand alongside the tech giant?

Trust issues

Mark Flamme, head of digital business for financial services at transformation consulting firm AlixPartners, noted: "In terms of trust, there has been much discussion in the media about how many large tech companies handle data." He mentioned that Facebook's efforts to create the digital currency Libra have faced strict scrutiny from lawmakers due to regulatory challenges. Last month, several major payment companies, including PayPal, Visa, Mastercard, and Stripe, withdrew from the Libra Association before their membership was formally confirmed.

Flamme believes that putting Citibank and Stanford Federal Credit Union at the forefront may indicate that Google wants to show its partnership is not just a tech project but is supported by financial institutions that consumers trust. Risk may be another reason for the divergence in brand strategy. He said: "For Apple Card, from a consumer perspective, the risk is low; I trust you to handle my card and transactions. But with a checking account, where I might accumulate savings, the risk is greater for me as a consumer. I need a more credible brand with FDIC insurance support." Flamme said that Google's checking account, backed by supporters like Citibank with a physical presence, may reassure some consumers.

Apple's reputation for innovation, especially among younger consumers, may have prompted the computing giant to place its own brand in a dominant position, at the expense of Goldman Sachs' brand exposure. Flamme said: "Rightly or wrongly, people think these tech companies are more innovative and can create better, smoother customer experiences, while banks seem old and rigid. So naming with a tech brand does create an appeal, and I think that appeals to younger demographics."

Anne Ryan, vice president and director of brand strategy at Brownstein Group, told Banking Dive that Apple is relying on its established brand to drive widespread adoption and merchant partnerships. She said: "They know that younger consumers who grew up during the 2007 recession do not trust banks, so they align with digital natives who trust technology and appreciate its seamless integration into life." According to The Wall Street Journal, Goldman Sachs is unhappy with Apple's choice of wording in its ads. The investment bank did not respond to Banking Dive's request for comment.

What does this mean for banks?

Flamme said that as such bank-tech partnerships become more common, financial institutions need to decide which side of the "glass" they stand on. He said: "This is a challenge for banks: do you become a 'dumb pipe' in the background, where people only remember the Apple brand? How do banks stay relevant?" Not all banks want to be at the forefront of partnerships, and there are advantages to that. Flamme said: "If that's your strategy, that's fine. You don't have to be a brand company; you can partner with all fintech companies. They do the hard work, distribution, and raising capital, while your bank holds large deposit balances." However, he warned that banks that give up their established brand may risk becoming commoditized.

Jake Levant, vice president of marketing at customer experience platform Lightico, told Banking Dive that fintech partnerships can provide learning opportunities for banks, especially in customer experience. He said: "Tech companies understand the gap in communication and experience between financial institutions and consumers. We've seen tech giants create excellent interactions time and again—think Uber or Netflix. This is an area where many banks struggle. Established, trusted brands have the opportunity to combine their legacy with technology that solves key customer experience gaps."

Partnership or competition?

Meenaz Sunderji, executive vice president at financial software company Zafin, told Banking Dive that tech companies are using these partnerships "to establish a foothold in financial services." She said: "Large tech companies are strong in IT capabilities but lack the expertise and regulatory background to become financial services companies, so they prefer to acquire these companies rather than partner. This may be a temporary measure before building credibility."

Michael Wasyl, managing partner at DeerCreek, a fintech corporate strategy firm, said these initiatives are just the first step for large tech companies. He said: "Tech companies are using banks' distribution, reach, and regulatory licenses. Once tech companies obtain proper regulatory and compliance approvals, they can launch digital-native financial products without relying on banks. Banks must sign these partnerships because they benefit from learning from tech giants and can gain new customers in the short term. However, in the long run, banks need to realize that tech companies may become competitors rather than partners."

Varo is a digital-only bank seeking its own bank charter, a move that would allow it to end its existing partnership with The Bancorp Bank, which currently provides FDIC-insured deposits for it. Varo received preliminary approval from the Office of the Comptroller of the Currency last year and expects to open as a national bank next year. Varo CEO Colin Walsh told Banking Dive last month that a national bank charter would reduce costs and allow Varo to offer a broader range of consumer banking products. He said: "When partnering with a sponsor bank, you don't get all the cost advantages."