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What would a Bank of Amazon look like?

Jul 29, 2019 / Consumer Banking / Technology

Another recession, a bank run, regulations, movies like “Pet Sematary”: Those could all cause bankers to stay up at night. But if you’re really feeling mischievous and want to give your banking colleagues bona fide insomnia, ask them how they’d feel if…

…Amazon became a bank.

To be clear: Amazon is not a bank. Nor is it in the planning stages (or so they say). Still it isn’t hard to imagine a Bank of Amazon. For starters, Amazon announced earlier this month that it would get into the real estate business. Their partnership with Realogy—the largest residential real estate company in the U.S—will create TurnKey, a program that provides products and services to help buyers with the home search and move into a new house. (No word on why they didn’t call it Prime Real Estate, or how Amazon would fit a house in a carboard box for free delivery within 48 hours.)

Meanwhile, the ecommerce juggernaut boasts:

  • multiple credit cards such as the Amazon Rewards Visa Signature Card and Amazon.com Business Credit Card.
  • plans for a secured credit card for consumers with bad credit, based on a recent partnership with Synchrony Bank.
  • small business loans (invitation only) through Amazon Lending.
  • Amazon Pay, which doubles as a digital wallet for customers and a payments network for retailers and shoppers.
  • A reputation for unparalleled customer experience that is the envy and endless conversation topic of bankers. Talk about delighting customers: You can even rent a brush-clearing goat through Amazon.

Consumers can also store money with Amazon Pay, just like you would at a bank, while Amazon Cash works at numerous participating stores that include 7-Eleven, CVS Pharmacy and Boost Mobile.

As if that weren’t enough, consumers are more than ready. Last year, Bain & Company surveyed 6,000 American adults on how they would feel if the retail giant went into banking. Sixty-five percent who were Amazon Prime members said they would be willing to try a free Amazon online bank account with 2 percent cash back on purchases—while 37 percent of Amazon non-regulars said the same.

Again: Amazon is not a bank. But these days, to quote the old saw, it often looks like a duck, quacks like a duck and swims like a duck. Here, we asked industry experts to weigh in what such a financial entity might offer, aside from discounts on bulk toilet paper.

From bookstores to branches?

The topic of Amazon in banking came up at Fortune magazine’s recent industry conference, Brianstorm Finance. Patrick Gauthier, vice president and general manager at Amazon Pay, seemed to indicate that Amazon wasn’t interested in banking.

“The fact that we can build something doesn’t mean that we should,” he said.

Yes, but … it also doesn’t mean that they wouldn’t. Rutger van Faassen, vice president of consumer lending at Informa Financial Intelligence, thinks that creating Bank of Amazon branches wouldn’t be challenging at all. He points out that Amazon already has brick-and-mortar bookstores.

“The Bank of Amazon would, in my mind, be closely integrated with the Amazon website and Amazon mobile app—with in-person help desks in its Whole Foods stores,” van Faassen says.

Nor would car loans be difficult for Amazon, according to Michael Diamond, general manager and senior vice president of digital banking at Mitek, an identity verification company. It should be pointed out that consumers can already purchase automobiles through Amazon (along with tires, mufflers, mats and garage door openers).

Diamond also points out that Amazon Prime has 101 million subscribers—all potential customers. “I anticipate that Amazon loans could very quickly be a formidable choice, particularly for consumers who may not have the strongest credit history,” Diamond says. “I imagine an environment where consumers both shop and finance their purchases in a few simple clicks…”

Hear that?

“… and if we follow what Amazon did for small businesses, the same will be a reality for consumers: Finance and buy more on Amazon.”

Banks boast relationships

For the galaxy of stuff it sells, Amazon doesn’t have bankers in its employ. That gives the traditional financial services institutions an edge. Bank marketing specialist Hilary Kelbick, president of MKP Communications, believes old-school institutions would be wise to hammer that point home.

“An Amazon Bank would more than likely refer customers to a customer service megacenter,” Kelbick believes. “Banks that offer individualized service, along with the credibility of being a reputable financial institution first and foremost, will be best positioned to compete and maintain an edge against Amazon’s impersonal model.”

In other words, “Do you want to bank where you also can buy a garden hose and socks, or do you want to bank with a bank?”

Yet many experts agree that banking stalwarts must evolve to compete. In fact, you could argue that banks will need to become more like Amazon. What should keep bankers pacing the floor if Amazon’s reputation for excellent customer service—and its so-called “seamless experience” that completes a transaction or suggests new items to buy in seconds.

Thus, banks will need to ramp up their technology and presentation, Kelbick says.

“If traditional banks can offer customers the ability to connect with their relationship manager via secure video or live chat for smaller requests or questions, and to meet in person for deeper conversations, then customers can obtain personalized service in whichever way they feel most comfortable,” she says.

Kelbick envisions banks looking a little like an Apple Store’s Genius Bar, where consumers could make important banking and investment decisions, conduct financial planning and strengthen relationships. “This is a model not likely to be adopted by any Amazon Bank,” she says.

Questions of compliance

Nor is it a slam dunk that a Bank of Amazon is coming to a mobile app or Main Street near you. David Cadden, professor emeritus at Quinnipiac University’s School of Business, believes Amazon will want to avoid all of the banking industry’s red tape.

“Entering into the banking services would mean that they’d have to meet national and state banking regulations,” Cadden points out. “Not having to comply with those regulations would give Amazon much more freedom of action.”

So Cadden sees Amazon as a wild card rather than a direct competitor. Just as it disrupted bookstores—“in fact, it destroyed many local bookstores”—he believes it will disrupt banking from the outside.

In fact, banks may wind up partnering with Amazon. The more it can track what customers spend on mortgages, rent or healthcare, the more it can serve as a clearing house for financial products. “Just as Amazon can tailor a list of suggested books for their customers, it could begin to tailor financial services,” Cadden says—with Amazon obviously taking a cut.

While this would allow Amazon to sidestep compliance wrangling, that doesn’t mean it faces an unencumbered future in finance; not with Facebook, Google and Apple showing signs of getting into the hunt. Yet this is unlikely to cause Amazon founder Jeff Bezos to lose any sleep—though bankers, considering the ambitions of those other tech behemoths, might lose even more.

It’s a good thing Amazon sells a slew of sleep aids.

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A contributor to Reuters, U.S. News & World Report, CNN and AOL’s WalletPop, veteran journalist Geoff Williams is also the author of two books, “C.C. Pyle’s Amazing Foot Race” and “Washed Away.”