Banks must face the likelihood of Amazon offering financial products and services, such as checking accounts, and develop strategies to co-exist in a platform-dominated world, according to a new report from Forrester Research.
By offering such products, the e-commerce giant stands to save about $1 billion it pays in transaction processing fees to card issuers each year on a global basis, which it could then apply to discounts on other products it sells on its site, according to the report.
A recent Forrester survey of more than 33,000 online adults in the U.S. and more than 13,000 in the U.K. found that 28% of U.S. respondents and 25% of U.K. respondents would trust Amazon to provide them with a digital mobile wallet, a higher percentage than many other major consumer brands outside of those already known primarily for financial services, such as Paypal, Visa and Mastercard.
It seems inevitable that Amazon has some kind of big banking announcement lurking on the horizon. The Wall Street Journal last month reported that Amazon was talking to JP Morgan Chase and others about offering checking accounts, which appears to have been a trigger for Forrester’s new report.
Around the time that news emerged, a survey from LendEDU also suggested that many consumers were ready to trust Amazon with such services. The company also reportedly has been mulling the offering of new payment card products, and late last year was said to be expanding its Amazon Pay Places order-and-pay mobile feature.
A deeper foray into banking seems so inevitable that it’s easy to forgot that Amazon has not said much at all about the speculation. Unfortunately for banks, they can’t take a wait-and-see approach according to Forrester — and if the banks don’t believe Forrester, there are plenty of brick-and-mortar retailers who have had their businesses turned upside-down by Amazon who would tell banks: Whatever you can to start innovating and differentiating, do it now.
While some of Forrester’s report focuses on what banks need to do to battle Amazon, it also summarizes Amazon’s lengthy history working the fringe of the financial services sectors in various ways, such as through its existing credit cards and other payment solutions. Forrester’s advice to Amazon is to forget about acting like a bank and continue to do what it always has done best: Focus on customer relationships.
Amazon will need to work to make sure it keeps customer empathy and trust top of mind and at the core of its financial offerings, or risk providing banking competitors with an opportunity to take the advantage in these areas, according to Forrester. The research firm suggested that Amazon need to make banking customers feel "emotionally valued," and not just a funnel for their personal data into Amazon — although Amazon also needs to make sure it leverages that data in a positive way to anticipate customer needs and preferences, something it has done very well as an e-commerce retailer.
Just being Amazon won’t guarantee the company’s success in banking. Yet, Forrester’s survey results showed that it has a good head start on many other major consumer brands in this area, including Apple, Google, Facebook, Samsung and Microsoft, all of which scored lower with survey respondents on the question of who they would trust as a digital mobile wallet provider.