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Why Amazon is interested in outside receipts

Jan 15, 2021 / Consumer Banking
A woman sits at her dining room table with laptop and financial reports doing her monthly budget.

Amazon recently launched the Amazon Shopper Panel, a program that pays customers for uploading their receipts from outside retailers. While the retail industry has speculated about Big Tech’s threat for years, this is a move bankers should really pay attention to – Amazon is the first tech giant that has the potential to capture outside spend, a huge piece of the customer behavior puzzle.

Banks still have the upper hand when it comes to knowing and serving their customers. They must, however, take proactive steps now to protect their relationships, encourage loyalty and maintain market share. It all hinges on them accessing and leveraging deeper, more contextual data points to remain competitive. They possess massive piles of data, but typically struggle to find ways to make it actionable and meaningful for their customers.

At the same time, popular brands outside the financial services industry – including Amazon, Google and Shopify – are slowly but surely chipping away at bank-customer relationships, using their own data to offer new products and services that directly compete with banks.

Banks must fight back with more meaningful data points. Transaction data gathered from purchases is a start – it can provide banks with limited information, such as merchant, total purchase amount and date. But this is not enough to fully understand the bigger picture of who a customer is and what their financial needs really are. Institutions need to dig deeper to identify and leverage alternative, contextual data to help them better know and understand their customers.

For example, SKU-level data derived from receipts reveals rich information, including merchant, items purchased, date and location, and form of payment. These details can reveal major life-stage events, values and lifestyles, and payment-preference patterns. Such information can indicate if a customer is starting a business and needs a business account, if they’re going to college and need a student loan, or if they’re starting a family and might need a 529 account.

With this level of insight, banks can deliver more personal, timely service that better secures their relevance in customers’ lives. Insights gleaned from alternative data can even help customers maximize savings and make each dollar go farther. Data can also help banks identify traditionally underserved segments, such as the gig economy and microbusinesses. Frequent trips to the gas station, for instance, might point to an Uber driver. Recurring large office supply orders might indicate a self-employed entrepreneur.

While these groups have complex financial needs, they’re often hidden in consumer accounts. The bank can’t help them because they don’t understand who they are and what their financial needs are.

Micro-segmentation creates an opportunity for new, more specific categories of customer profiles, leading to more relevant cross-sell opportunities and greater loyalty. Such attention to small and micro businesses are especially important now, as these groups have been hit particularly hard by the COVID-19 pandemic and need their local bank to show up for them with catered financial tools and advice.

Amazon clearly recognizes the value of SKU-level data and now wants to know offline spend, something that’s traditionally been unique to banks. Consider how much knowledge the retailer can gain about their customers if they collect SKU-level data from outside receipts, in addition to the data already in their possession from Amazon video viewership, reading lists from Audible, and Prime deliveries.

Combining their existing data with offline spend could significantly strengthen the types of programs developed and offers recommended. For example, knowing a customer bought a keto-friendly cookbook on Audible, regularly purchases fruits and vegetables, and streams workout tutorials on Prime Video, Amazon could proactively suggest top-rated workout equipment and gear, demonstrating to the customer they see them and can anticipate their needs. Knowledge is power, which large tech firms like Amazon understand and are even starting to pay for—$10 for 10 receipts, to be exact.

The battle for customer relationships and loyalty is on. Even though Amazon and others from Big Techs are trying to gain an edge by capturing information once unique to banks, traditional institutions can stay ahead by acting on data that has always been at their fingertips.

By leveraging deeper, contextual data to better know and more accurately segment customers, banks can forge stronger relationships, cement loyalty and increase profitability with relevant cross-selling opportunities.

Corey Gross is co-founder and CEO at Sensibill.