Amazonian warriors’
bows trained on banks

Amazon arrowA recent Fiserv survey confirms—among other insights—that trust remains a primary driver behind the public’s preference for bona fide banks over non-bank alternatives. Which is why I wish to draw attention to the first runner-up on Reputation Institute’s latest list of America’s most reputable retailers: 

Second only to Barnes & Noble was none other than Amazon.

Amazon, as you likely already know, shows up in the news from time to time for its habit of upheaving every industry it touches. And it already has a good deal more than a toe in the financial services industry—with no regard, as American Banker points out, for trivialities the likes of securing a charter: 

Who needs a banking charter, anyway?

Not Amazon. The most feared company in America keeps finding new ways to eat into banks’ revenues, even though it is supposedly on the wrong side of the industry’s regulatory moat.

The e-commerce giant is already making small-business loans, finding ways to cut into banks’ swipe-fee revenue, and competing against prepaid card issuers.

American Banker went on to say that … 

… several recent developments suggest that Amazon has substantially broader ambitions. Checking accounts, small business credit cards and even mortgages all appear to be in the company’s sights.

And The Wall Street Journal reported earlier this year: Inc. is in talks with big banks including JPMorgan Chase & Co. about building a checking-account-like product the online retailer could offer its customers, according to people familiar with the matter.

(Chase, Capital One, and Amazon did not comment on what “people familiar with the matter” had to say.)

While the banking industry is no stranger to competitive threats, Amazon poses a competitive threat well out of the ordinary. Tearsheet recently reported:

The idea of a “Bank of Amazon” was the first of 10 trends to watch in financial services over the next year … Amazon knows how to keep people happy. CB Insights data found 86 percent customer satisfaction at Amazon, compared to Citi (82 percent), Capital One (80 percent), “all banks” (80 percent), TD Bank (79 percent), and Bank of America and Chase (each 75 percent). Studies show most millennials would rather bank with the Amazons of the world, Facebook and Google included, than their existing banks.

Presenting a daunting list of financial services that Amazon has already developed in-house, Fast Company warned:

Amazon specializes in creating tech-based ecosystems that generate valuable customer data, like online retail, online video, and the connected home. Once such an ecosystem is established, the company is well positioned to layer on products and services that manage related payments, credit needs, or risk.

Finextra summed up the Amazon threat by quoting Bain & Company partner Gerard du Toit:

“For retail banks, the key lesson is that their main competition consists not of traditional banks, but rather the large technology firms such as Amazon that have upended entire industries,” says du Toit. “Tech firms have already reset customer expectations for what a good experience feels like, and Amazon’s expected entry into core banking heightens the urgency of accelerating work to improve the customer experience, largely by making it simpler and more digital.”

Amazon certainly has the know-how, the reach, and the technology to wreak havoc on the financial services industry as we know it. And as for the crucial matter of trust, last month CNBC reported on a recent Bain & Company survey:

Bain surveyed 6,000 U.S. consumers recently with a simple question: If Amazon launched a free online bank account that came with 2 percent cash back on all purchases, would you sign up to try it?

All else being equal, younger respondents were more likely to answer with yes, according to the survey. Almost 70 percent of those in the 18-to-34 age bracket would try the Amazon account, compared with about 50 percent of those 35 to 54 years old and under 40 percent of those older than 55.

And this warning comes from The Financial Brand’s executive editor Steve Cocheo:

Amazon already offers a quasi-deposit service, credit cards, and business loans. Amazon can turn jars of change into gift cards, and will give your kids their allowance via a reloadable debit feature. At what point do executives in the traditional financial industry concede that Amazon is, in fact, a bank?

Perhaps that’s why CNBC opened the above-referenced article with this ominous lede: “Banks, you’ve been warned.”

Lest I be accused of writing a downer of a post this time around, let me state that what I’m attempting to do is write a motivating post, not a depressing one. Forewarned, as they say, is forearmed. Provided we all get busy.

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