Bain is once again raising the spectre of the big banking bogeyman that is Amazon, pointing to research which suggests that 65% of Prime subscribers would be prepared to open a bank account with the e-commerce giant.
The study, conducted among 6000 US adults, finds that US banks trail Amazon in customer loyalty, earning the company a Net Promoter score of 47, significantly higher than the score of 31 for regional banks on average, or 18 for the national bank average.
The survey suggests that Amazon can count on significant demand for basic banking services. Among Amazon Prime respondents (who pay an annual fee for such perks as free shipping and streaming services), 65% say they would try a free online bank account that offered two percent cash back on their online shopping, similar to the company’s cobranded credit card.
Of Amazon customers who aren’t Prime members, 43% would try such an account. Even among people who don’t use Amazon for e-commerce purchases today, 37% would try it.
Amazon has many other advantages over incumbents, says Bain partner Gerard du Toit, citing a high and rising frequency of purchasing, viewing, listening and reviewing interactions with customers; a full commercial relationship, including credit cards on file; integration into consumers’ computers, smartphones, tablets, TVs and home audio devices; a paid membership programme with 90%-plus renewal rates and the majority of US households as members.
What's more, "Amazon has the potential for a light physical-branch footprint in the form of its Whole Foods Market network, which could feature shelf space to sell products, advanced video ATMs or service kiosks," he suggests.
Bain has been here before. In March the consultancy estimated that a banking service from Amazon could swell to more than 70 million US customer accounts within five years, equaling the size of the country's third largest bank, Wells Fargo.
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.
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.
"For retail banks, the key lesson is that their main competition consists not of traditional banks, but rather the large technology firms such as Amazon that have upended entire industries.," says du Toit. "Tech firms have already reset customer expectations for what a good experience feels like, and Amazon’s expected entry into core banking heightens the urgency of accelerating work to improve the customer experience, largely by making it simpler and more digital."