It’s a whole new banking war.. | Tutorial Freak – Online Tutorials

It’s a whole new banking war..

amazon bank

It’s a whole new banking war..

Unless you were off the grid last week, you will probably have heard the rumours that Amazon may be entering the banking arena, with the global e-commerce and cloud computing company engaging in talks with JP Morgan to offer current accounts in the US.

But there’s an ominous scarcity of detail. This seismic event should have shaken the board rooms of every retail bank in the world. And whilst the prospect of Amazon obtaining full banking licences, operations, logistics and so on globally, might seem a tall order any time soon, the starting gun has been fired. Even if Amazon merely partners with JP Morgan, that’s enough to set off a string of similar partnerships, and a round of meaningful disruption.

What the UK retail banks should and almost certainly do fear most, far more than erosion from the fintechs, is waves of attacks on their business by global technology giants; these completely alien life forms have unlimited cash, great innovation, huge databases of loyal customers, and massive brands. Indeed, fighting off the relatively small fintech start-ups even seems to have become a low priority, since the initial panic from 2012. Shovel out a better app, a tip of the cap to Open Banking, attend some fintech shows, and make soothing noises to the FCA, and that’s it; all pretty much parked for now, allowing the old boys to get on with some more serious stuff.

Well, forget it. This is now a different game. And you know the oddest thing about it? Those who were once foes must now become allies. It’s like war: fight those who most threaten you, forget history, and form alliances with those who can reinforce you. If that happens to be your most recent foe, well, so be it.

The big retail banks certainly have most to lose from the threat of Amazon and (coming soon) Google and Facebook. PayPal should not be sniffed at either. The banks know that they are extremely vulnerable. They lack the vision, innovation, spirit, and technologies to greenfield a formidable response. They need the fintechs, and they need them now. The value of fintechs just went up a click or two.

But it’s a two-way street, believe me. For the fintech babies, the Amazon news will have made them soil their nappies. It’s an absolute stinker, too. If Amazon and Google and others become bankers, where’s the long-term role for small digital banks? What’s so exciting about a shouty app-based bank versus the tech appeal of the mighty consumer-centric, all-embracing Amazon with zillions of customers?

The ghastly certainty is that, if the fintech banks want to avoid becoming collateral road kill – crushed by the tech tanks as they roll onto the front lawns of the big retail banks – they need an alliance just as badly as anyone.

We used to talk about ‘ICE’ – Internet Changes Everything. Well now it’s ‘ACE’ – Amazon Changes Everything. Old battles will end, and new alliances will be forged. Banks plus fintechs. It was always the destiny, but now, there is a burning platform called survival. We at TutFREAK will follow this story with interest & bring you news as and when..

amazon-bank

More:

Bain and Co, estimates that a banking service from Amazon could swell to more than 70 million US customer accounts within five years, equalling the size of the country’s third largest bank, Wells Fargo.
The analysis by the firm’s banking and payments lead Gerard du Toit and retail head Aaron Cheris, follows reports that the e-commerce behemoth has begun talking to banks, including JPMorgan Chase and Capital One, about developing a checking account-style product for its millions of customers.

For Amazon, a banking tie-up would enable the firm to skirt regulatory barriers, but it may also act as a Trojan Horse, enabling the firm to save on interchange fees and move into other more lucrative financial products.

By making it easy for customers to pay right from their Amazon bank account instead of with their credit cards, Bain & Company estimates that Amazon could avoid more than a quarter of a billion dollars in annual interchange fees in the US alone.

The 70 million customer figure assumes that Amazon forges a financial relationship with up to half of its customer base, the same share of people who said in a recent Bain survey that they expect to buy a financial product from a major technology firm over the next five years.

States the consultancy: “Once Amazon has established a cobranded basic banking service, we expect the company to move steadily but surely into other financial products, including lending (both purchase financing and debt consolidation), mortgages, property and casualty insurance, wealth management (starting with a simple money market fund to hold larger balances), and term life insurance.”

Bain points to the successs of e-commerce giants like Alibaba in China and Rakuten in Japan in penetrating banking strongholds, using their vast data sets to expand their brands into new markets and build strong financial relationships with customers.

As Amazon expands its banking reach, the greatest latent demand exists in countries such as India and Mexico, suggests Bain, where the banking experience, especially in branches, is time consuming and cumbersome and mobile banking is still nascent. Both of those countries are key secondary markets for Amazon, says the consultancy, and the company can be expected to expand in its other core markets, including the UK, Germany and Japan.

“For bank executives and board members, this is a watershed moment,” suggest Bain. “Amazon’s entry takes the competition into a different league. Consumers’ expectations keep rising as people grow accustomed to simple, convenient digital channels perfected by digital natives such as Amazon. If banks don’t reorient their approach and radically accelerate their rate of progress, they will watch technology firms steadily poach their business. At first, it will be the unprofitable slice that no one wants. Then the rest of the pie.”

amazonbank

It would be aimed at younger customers and those without bank accounts, but the firm would stop short of becoming a bank.
The move would mark yet another attempt by the tech company to break into a new industry.
Amazon stunned the retail sector with its £10.7billion takeover of Whole Foods last year and rumours it is poised to sell prescription drugs have also set pulses racing in the pharmaceuticals industry.
Its £527billion market cap – bigger than the combined value of JP Morgan and Bank of America, the two biggest US banks – makes it a formidable and well-resourced competitor in banking.
However, the report yesterday said Amazon was more likely to partner with an existing bank than become one, partly due to tough capital controls it would be subject to otherwise.

KeithM..

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KeithM.. – who has written posts on Tutorial Freak – Online Tutorials.


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