In our last industry snapshot Taking a Bite Out of Banking, we outlined current competition in banking and what to do about challengers outside of banking that are disrupting pockets of the financial services industry. One particular challenger can generate a powerful sense of dread because of its sheer scope and scale. When Amazon enters an industry, it often brings with it deep pockets and a seemingly bottomless appetite for risk. Just as it did for retail, Amazon upends the “usual” ways of doing business by introducing things consumers didn’t even know they wanted and delivery mechanisms previously unimagined. But there are things banking already does better than Amazon could ever hope to.
Amazon has already taken a bite out of some of banking’s profit centers, offering prepaid cards, lines-of-credit and small business loans to consumers. The retail giant is also offering discounts for using gift cards as opposed to credit cards, in a work-around to swipe fees, and is investigating ways to enter the mortgage market. While these are nibbles at some of the ways banks generate revenue, very few of these forays into banking challenge banking’s core competencies and service-sets. With mortgages, outside companies have been providing alternatives to bank-based lending for home purchases for nearly two decades. The fact that these services have moved online should really come as no surprise.
Word on the street now is that Amazon is looking to worm its way into banking and is already in talks with financial companies like JPMorgan Chase, Capital One and other big banks to pull it off. Yet, in its prototypical manner, a veil of secrecy surrounds the discussions. What’s all of this cloak-and-dagger about? Amazon branded checking accounts. That’s right: the service the retail giant wants to provide checking accounts. News of this “new” service hit the industry with a thud, barely impacting bank stocks. CNN reports that’s “probably because Amazon would apparently work with the big financial firms as opposed to trying to pull an end around on them.” We think something else is at play, here.
When Amazon provides real competition in an industry, it’s when it’s offering something different and new or revolutionizing the way we think about a category – home delivery, for example. Checking accounts aren’t new. In fact, banks have been offering checking accounts since the advent of banking. While it’s clear to see how an Amazon-branded account would help Amazon – reducing enterprise credit card fees and streamlining cash movement between accounts and the payee (Amazon), for example – it’s much less clear how such an account would help the consumer. The retailer can offer discounts and other incentives to switch, but banking’s already got a leg up on Amazon here.
In our article on Reinventing Shopping Experiences, we outlined the importance of brick-and-mortar retail locations and how in-person services are so compelling that online only brands – like Amazon – are creating and curating retail stores to serve customers. But banking’s already doing that. Sean Keathley, President of Adrenaline says, “Banks are already ahead of any outside challenger because of their existing network of branches that they’ve likely already begun to optimize. We already know that people want to visit a branch to open accounts. That’s because personal finance is personal. Sure, we want to automate routine transactions, but we want a more personalized service waiting for us when we need it and branches have that type of customer experience in spaces.”
Fintech has created many challenges to banking, particularly on the transactions front. But banks are learning that while they must provide seamless transactions and build platforms to meet consumer demand, they have already built something that no startup can touch. Sean Keathley says, “A strong branch network really provides the perfect setting to build robust relationships with local customers and demonstrate a community commitment that no amount of fintech savvy can replicate. By concentrating on their “North Star” – the ideal embodiment of the branch experience at any time – banks can meet any outside forces of change with the right people and processes to produce the branch of the future.”
Sean Keathley and Gina Bleedorn will be presenting at Future Branches in Austin in December. For more information on trends in the banking industry or to speak with one of our experts, contact us at firstname.lastname@example.org.