Amazon has a Good Chance of Successfully Disrupting the Banking Sector

The e-commerce giant is said to be in talks with major banks like JP Morgan for a deposit account offering targeting young adults and people without an account. Amazon, which already offers Visa cards to its US customers, could realize significant savings in transaction costs, say experts at Bain & Company.

Carrefour has its bank, so why not Amazon? The e-commerce giant is said to be in talks with several big banks, including JP Morgan, to launch a sort of current account, according to the Wall Street Journal. But Amazon does not intend to become a bank strictly speaking (with its attendant regulatory and prudential constraints).

It would not be his first foray into the world of payment: Amazon has already been offering for the past year a free Visa card, usable everywhere online and at restaurants, gas stations, and pharmacies, internationally, for its American customers and subscribers to its premium service. The logo of the issuing bank, Chase & Co (a retail subsidiary of the JP Morgan group) does not even appear there.

The e-merchant launched its first bank card at its brand with JP Morgan in 2002 and offers several cards offering benefits (cashback of a few percents on each purchase) and payment facilities. He is also trying to deploy his Amazon Pay system, which can pay with his Amazon account only, on other sites in the United States and Europe with mixed success. He plans to expand it to physical stores, including its organic Whole Foods stores.

Amazon plans to go further and target young customers and people without bank account (which cannot buy on its site): the Seattle firm would have launched in the fall a call for projects for a hybrid check account contours still unclear, JP Morgan and Capital One are on the line, according to information from the Wall Street Journal.

This partner has something to worry even these major players with whom it discusses, with its market capitalization of 737 billion dollars, as much as JP Morgan Chase (394 billion) and Bank of America Merrill Lynch (329 billion) cumulated, and its ability to invest in the long term without seeking immediate profitability.

The bank threatened to be ” Amazonized”?

Is the ” Amazon moment of the bank ” question experts Bain & Company consulting firm? On the other side of the Atlantic, there is no longer any talk of “uberizing” but “amazonizing”, as the ebullient giant’s bursting outburst is feared in many sectors such as health, delivery, food distribution and auto parts. , each announcement or rumor leading to the fall in stock prices of potential victims.

“Amazon has a very good chance of succeeding in the banking sector by disrupting the industry as it did in the retail business,” said Gerard du Toit and Aaron Cheris of Bain & Co.

A recent US firm survey revealed that 73% of Americans aged 18 to 34 were willing to subscribe to a financial service from a technology company and found Amazon and PayPal almost as reliable as other traditional banks (except their bank). Well aware of the strategic nature of banking data, Amazon has always refused to integrate PayPal as a method of payment.

If the current account is not necessarily a profitable activity, especially without account maintenance fees, Amazon already has the advantage of not bearing the costs of a network of agencies and call centers (about 40% Bain’s US retail banking costs), while already having a large customer base (more than 300 million active customers worldwide). The Web giant could also use the voice assistant Alexa from its connected speaker Echo.

Already gaining access to mountains of shopping data, Amazon could learn even more about the types of spending and user behavior, including offline, and conquer new customers. The firm of Jeff Bezos could especially achieve significant savings on transactions (interchange fees paid by merchants for each payment card), by launching a current account. Bain’s experts have calculated that Amazon could save $ 250 million a year in interchange fees in the US alone, assuming that 15 percent of customers would use their Amazon accounts to pay instead of their own. Bankcard.

Potential of 70 million banking customers in 5 years

Amazon has the potential to be a ” game changer “, to change the game according to bank specialists at Bain & Company who project that the Web giant could convince more than 70 million customers in the United States to use its banking services within five years, “as much as Wells Fargo, the third largest US retail bank “! They start from the hypothesis, all very optimistic, that half of the American customers of the e-tailer would decide to subscribe to this new financial service.

“Among America’s leading technology companies, Amazon is best positioned to succeed in the banking industry in the United States. It has a high frequency of buying and reviewing interactions with customers; a complete commercial relationship, including credit card data; a presence in consumer computers, smartphones, tablets, televisions and home audio devices; excellent service, including an excellent return policy; and no major security breach so far. No other technology company can claim all these benefits, “say experts at Bain & Co.

They also imagine that ” once a co-branding banking service has been set up,” the Seattle-based company will gradually develop an offer of financial products, such as loans (purchase financing or loan redemption), loans real estate, property and casualty insurance, and even wealth management and life insurance.

In the footsteps of Alibaba

With a wealth of data, Amazon could send targeted offers based on the moments of life (marriage, birth, real estate acquisition) and further enrich its knowledge of customers and typical behaviors.

The road has already been traced by the Chinese jugo of e-commerce, Alibaba, whose financial subsidiary, Ant Financial, is already the first Fintech in the world: it offers a wealth management app ( Ant Fortune), an online bank for SMEs (MYbank) and a credit score analysis service (Zhima Credit).

In Europe, unlike some rumors, Amazon does not have a banking license – it does not appear in the list of European institutions supervised by the ECB, where on the other hand are Orange Bank, Carrefour Bank, the German nebbian N26 or PayPal. It has the status of electronic money institution, assigned to its subsidiary Amazon Payments Europe registered in Luxembourg. This would allow him to offer an account without overdraft Nickel Account but not credit. Except to find a partner …

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