While the details surrounding the features of Google's yet-to-be-launched checking accounts have been sparse, its latest announcement shows the tech giant is turning to midsize institutions as partners in the venture. 

Earlier this month, six new financial institutions signed on as partners for the checking accounts, expected to launch in 2021. BankMobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank and SEFCU make up the latest cohort to sign on to offer the co-branded bank accounts, joining Citi and Stanford Federal Credit Union (SFCU), which were named as the project's first partners in November. 

"Google is very intentionally trying to show the market that this is not just a partnership for the largest banks. They very much want midsize institutions," said Ron Shevlin, director of research at Cornerstone Advisors.

The accounts will be built on top of the financial institutions' existing infrastructure, and Google is expected to provide the front end, user experiences and financial insights.

So far, the eight-member group includes two credit unions, two community banks and a digital bank. BMO Harris and BBVA USA are larger, but they don't crack the $1 trillion-asset territory that megabanks JPMorgan Chase, Bank of America and Wells Fargo occupy. 

And while $1.9 trillion-asset Citi may be the outlier of the group, Shevlin said the bank is still small in terms of retail presence. 

"Citi's a huge credit card issuer and lender in various spaces, but it doesn't have the retail banking footprint that the other three [megabanks] do," he said. 

What are these institutions hoping to get out of a partnership with Google?

For midsize institutions and small community banks, Google's offering is an opportunity to scale business away from the larger players, Shevlin said.

"There is a large opportunity for Google to leverage its massive direct consumer relationships to attract [banks] to sign up for co-branded checking accounts," said Josh Li, chief business officer at Apifiny, who spent 12 years in senior business development and operations roles at Google. "For many of the bank and credit union partners, especially some of the smaller ones, this new channel will provide a tremendous opportunity to acquire new customers." 

Google's reach gives even the larger Citi an opportunity to draw more customers without expanding its branch presence, which is already slighter than most big banks. 

"We have to be where our customers are," Anand Selva, who heads Citi's consumer bank, told The Wall Street Journal last year.

The partnerships could also be a branding play for at least three of the institutions, said Tommy Nicholas, CEO and co-founder of New York City-based fintech firm Alloy. 

"For Citibank, I suspect this must be their core rationale. They would like to be seen as tech-forward and modern," he said. "I suspect BMO Harris and Coastal Community Bank have related interests in this, as well. I believe both are interested in continuing to power large tech partnerships that require banking services. CCB, in particular, has an entire business around this, and I believe this serves as a marquee deal for them, regardless of the underlying economics."

The deal could also help accelerate the digital and mobile banking strategies for the banks, Li said.

"Many banks, such as BBVA USA, already have a digital and mobile banking strategy. By partnering with Google, this just provides an additional way for them to execute on and improve their strategy," he said.

Google's existing customer base is a tech-savvy demographic that already uses mobile banking, Li said. That's a factor that could reduce banks' average service costs. 

The partner banks could also leverage Google's technology, such as its geolocation and mobile operating systems and applications, to offer new product features, Li said. 

"Google can potentially make targeted mobile app marketing offers asking if consumers would like more information on a low-interest home equity loan from one of the partner banks when consumers are in a mall, at a furniture store, or searching on Google.com for an expensive piece of furniture," he said.

While a powerhouse such as Google may have much to offer its banking partners in terms of technology and branding, there are some areas where banks should exercise caution.

"They may be just a commodity to Google," Nicholas said of the partner banks. "What is their pricing power? What is Google's incentive to give them deposits, bins, fee revenue if there are already eight of them? The revenue and deposits may never materialize."

Google has had many false starts in this area and has historically lacked strong fintech leadership, Nicholas said.

Li said banks should also take into consideration the multiple-partner aspect of the accounts.

"Although the tech giants have billions of customers and can quickly bring new consumers to the co-branded accounts, it is still the tech giant that owns the customer relationship," he said. "If the tech giant offers many different bank partners as options, in essence, the bank is serving more as an original equipment manufacturer, and consumers may not have a strong loyalty to the bank's products."

There's also the data privacy issues associated with large tech companies such as Google, whose access to huge amounts of consumer data make it a prime target for hackers. 

"If [a data breach] does happen, it may harm the bank's brand and reputation," Li said. "Banks and credit unions are usually thought of as 'safe, secure, trustworthy.' Even if the data loss is due to the fault of the tech giant partner, the end consumer may still think that the bank is somehow also partially responsible."

It could also take time before interested consumers decide to move their entire accounts over to Google, meaning the partner banks won't see the benefits for a few years, Shevlin said. 

"A lot of banks are jumping on board because it's low risk and you get a really nice awareness when you say, 'We're partnering with Google,'" he said. "But it'll probably be years before this really has any meaningful impacts on a midsize, small bank or credit union's customer member base."

Banks should also be careful not to use the partnership as an excuse to stop innovating their own checking accounts or deposit products, Shevlin added.

"You can't just stop the innovation efforts just because you think Google's going to fill the gap," he said.