Data, trust and scale. These are often cited as the three core elements to ‘winning’ in financial services. The implication is that banks have these in abundance, and it’s dangerous and misleading. Unfortunately, it’s so ingrained that across every industry event I attend, vast swathes of bank executives believe this blindly and are wilfully ignoring what’s happening around them.
At a recent meeting examining the open future of financial services, I discussed how Amazon is positioned to win hearts, minds and share of wallet through all three of those elements. A bank exec leaned in and asked earnestly: “So when this is going to happen?” Going. To. Happen. They thought I was discussing sci-fi, a vision of a future state as yet unimagined. I was actually reviewing the history of how tech titans have moved in to financial services – the customer mind share land grab. Ah, but they won’t want to get a bank licence is the usual retort. Sorry, they don’t need one (even though some have already got them) to create the financial services customers want to use.
The ‘tech titans’ are approaching financial services not as a series of products to be pushed, but through the prism of service, and they’re doing it in a way that works for them and their business model. This includes the use of APIs, which Amazon, Facebook and Uber already have a much firmer grasp on than banks and other financial services companies. Banks tend to focus either on the technology itself or the complying with regulation, because they’re engineered towards that way of thinking. As I argued in my previous column, it’s because they have lost characteristics such as imagination, creativity and, I would argue, courage.
As a consumer today, you use Amazon Balance, a facility you can top up on- and offline; you use Amazon Pay to pay for services, and, if you’re a Prime customer, for every purchase via the facility you get 2% cashback. That looks an awful lot like a bank balance, with 1-Click pay that also incentivises you to spend with the benefits a bank-issued card might provide. With Amazon Pay Places, customers can pay in-store and order ahead shopping experiences using their Amazon app rather than a card, cash (even cheques, where they’re still used), using their Amazon account information. It also provides online merchants with the ability to add a button on their websites’ checkout pages that let shoppers pay via their Amazon account info.
The idea is that by doing so, customers are more likely not to abandon carts and checkout is sped up. So there you have funding, payments, credit/lending facilities for SMEs all within one ecosystem. Not a bank? Needs a banking licence to deliver these services you say? OK, so how about scale? As of March 2017, there were approximately 80 million Amazon Prime members in the United States, with 64% of households estimated to have a Prime account. They have the brand, they have the service and they have the data. Their communication is far ahead of most banks.
The Amazons and Googles have already figured out the tech foundation – the ability to mine the vast swathes of data they hold – and are now applying it to find and serve unmet and underserved needs. Amazon’s logistics and delivery infrastructure, its access to personal data about purchasing habits and patterns, places it in a unique position. Far more so, I would argue, than Google. It has the insight, the infrastructure and most importantly the vision to build and deliver, at scale, the next generation of financial services. It also has the service design ethos that makes people want to take up their latest offerings. With that power, it can reimagine what financial services looks like through adjacency at scale.
You can easily foresee how Amazon will be able to anticipate spending patterns, co-mingle data from its various services to meet unmet or underserved needs, or help SMEs avoid overdraft charges through flexible funding facilities that take into account cash flows it can see through historical data and project into the future – including tracking against similar businesses on Amazon marketplace.
These services – the key word being ‘services’, not banking products – will dynamically flex and flow with consumers and businesses as their lives and financial needs change. Not on a yearly review basis, but in real-time through the data that sits within their ecosystem. This doesn’t even take into account an entire swathe of its business called Amazon Web Services, the cloud computing business that’s quietly helping to reshape how the financial industry works, with banks of all sizes relying on AWS for storage, processing and analytics.
In essence, Amazon is already running the banks and now it’s competing directly for large portions of their revenue streams. Service by service, need by need. Data, trust and scale. Banks need to realise none of this is science fiction. It’s actually history, with Amazon leading the charge, and Google, Facebook and others eagerly following.
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