Industry Alert

What is your bank's strategy to compete with an Amazon "checking" account?

March 27, 2018

A recent Wall Street Journal article reported that Amazon is in talks with Capital One and Chase on launching a “checking” account.  The report says that while talks are at an early stage, they could lead to the launch of some type of an account in the near future.


What are the implications for the banking industry?  An article in Business Insider estimated that Amazon has 65-80m Prime customers.  These are customers that pay $99 annually to receive shipping and other benefits from Amazon.  Providing a bank account as an added benefit for being an Amazon Prime member would be a valuable add-on for their well-established customer base in the U.S.  This feature would be a great way to deepen engagement with an already loyal base. 


Amazon currently provides a number of “bank-like” services to its customers (loans, Amazon Cash, credit cards).  Amazon Cash functions as a digital debit card in which users can store funds within the Amazon Cash account.  Expansion into providing a physical debit card, as part of Amazon Cash, would be an easy next step.  In fact, banking advisory firm Cornerstone Advisors reported that 73% of older millennials would likely use an Amazon debit card as their primary or secondary card. 


As if the threat from a “Bank of Amazon” is not worrisome enough, digital competition and disruption is already rampant in the industry from “bank-like” competitors such as Square, Paypal/Venmo, Robinhood, Acorns, Robo-Advisors, and Alternative lenders like Prosper.  Financial Institutions also compete with Digital Banks like Ally, CapitalOne360, Liquid, Finn, and PurePoint Financial that can serve customers anywhere in the U.S.


What is your bank’s strategy to compete against a bank like Amazon, or Paypal, Finn, or the bank with branches across the street from yours?   Competition for customers and deposits will be fierce in the years ahead.  One battleground in which your bank has an early lead is with access to customer transaction data.  Insights from your customer’s transactions are extremely valuable, and when these insights are leveraged, can lead to deeper customer engagement, increased satisfaction, and loyalty.  Your bank has a huge lead on the competition in that you have insights on where people move money too, and where money is coming from when moved into your accounts.  These money movement insights can include bill payment activity, investing, buying insurance, getting a passport, paying school tuition, getting a new loan from a competitor, and other financial activity.   Insights from your customers transactions provide a doorway to deepening your relationships with them and identifying opportunities to meet their real time financial needs.  Your customers transactions are unique to your institution and these insights must be leveraged efficiently in order for your bank to retain your customer base during the competitive environment that lies ahead.   Providing value, as Amazon does for its Prime members, will be key to being competitive in the future.  You can provide this value when you are more aware of, and can identify, the needs of your customers via the analysis of their transaction data.


IFM encourages financial institutions to increase their leverage of their customers real-time transaction data to stay competitive.  Your bank’s data is unique to your institution and is not available to other outside non-bank and digital bank competitors.  To learn how to develop innovative strategies for leveraging your customers transaction data, contact IFM.  We use our 15+ years of experience to help banks compete now and in the future.  By contacting us, we’ll provide a free, no-obligation strategic review of the opportunities available from increasing your analysis of customer transaction data. 

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