We’ll all be banking with Amazon in 10 years: Agree?

Is Amazon Bank fast approaching, or is this a FinTech mountain that even Jeff Bezos’ e-commerce behemoth can’t climb?
22 May 2018

I recently came across a Twitter poll posing the question: We’ll all be banking with Amazon in 10 years: agree or disagree?

This being social media and the poll having been created by one of those ‘FinTech influencers’ you get these days, I expected an overwhelming majority to agree that Amazon will indeed be on top of the banking world by 2028. However, of the 172 people who took part, 58 percent disagreed. And I’m with them; most people will stick with what they know.

Why would Amazon even want to get involved, you might well ask? It’s a fair question, given the necessary regulation and all those headline-grabbing hefty fines.

The answer is that Amazon would not legally become a bank. It has a proven track record of testing the water with a service and seeing the uptake. It is, for instance, a major client of FedEx, UPS, DHL etc. But now we see it building its own logistics network.

When it comes to banking, it will partner with leading players in the field.

Earlier this year, it was reported that the company was talking to the likes of JPMorgan Chase and Capital One about developing a checking account-style product.

These partners would hold deposits, while Amazon designed and managed the customer experience and distribution side of things, thus sidestepping a regulatory minefield.

Bain & Company estimates that a banking service from Amazon could pull in more than 70 million US customer accounts within five years, equalling the size of the country’s third-largest bank, Wells Fargo.

The argument goes that the tech giants have a loyal brand following in their own right; if they can combine this with a competitive product offering there will be a seismic shift in market dynamics.

But do loyal Amazon customers really want to be guinea pigs when their money is at stake? The Bain & Company research assumes that Amazon forges a financial relationship with up to half of its customer base. That’s a big assumption to make.

Buying books and groceries is one thing. But people tend to be very conservative when it comes to their finances. Just look at how long it is taking mobile payments offerings like Apple Pay and Samsung Pay to catch on.

51 percent of Brits under 45 years old would be interested in banking products or services from Apple, Amazon or Google, according to recent Equifax research involving 2,002 people.

That’s pretty low, really, given the tech-savvy age group involved. Across all age groups, meanwhile, the level of interest falls to 40 percent, with 27 percent of Brits preferring to stick with their existing bank on a ‘better the devil you know’ basis.

So, in 2028 Amazon will undoubtedly be one of many new entrants, slugging it out for a slice of a hugely lucrative market. But don’t believe the hype. It will disrupt but not dominate the banking landscape.