Beware: The “Bank of Bezos” is Coming

Dan Fisher

With over 35 years in the financial industry, Dan M. Fisher has proven himself as a leader in the financial industry holding roles as the former director of the Federal Reserve Bank of Minneapolis and former Chairman of the ABA Payment Committee.

How is Amazon changing YOUR community financial institution’s customers’ and members’ expectations?

Amazon virtually busted through brick and mortar commerce throughout the past decade. From humble beginnings, Amazon launched in 1994 as an online book store. According to Bloomberg News, in 2015 Amazon eclipsed Walmart as the most valuable retailer, globally. One question? How? Okay, two questions: How? And how is this going to affect your community financial institution?

Imbedded deep into Amazon’s culture, the spirit of innovation thrives. Amazon has figured out how to distribute a service or product for just about EVERYONE. Because of this, consumers’ expectations keep changing and the proof is in the “closed” signs. We have seen the big box stores of Sears, Toys R Us, Herbergers, Wet Seal, The Limited, Guess, etc. go out of business. Rumors of JC Penney folding have circulated for years. You get the point — retail has fundamentally changed FOREVER.

B.Z. Drone Home

Amazon invented buttons you can put in your cabinets at home that will ship products to your door just by pressing once. Seriously ponder that thought: Amazon created a way to put their business directly IN your home. A simple task like creating a grocery list has changed. Just use Amazon’s Wand to scan barcodes and electronically add them in your cart.

In addition to your home, Amazon has weaseled its way into your company. Let’s say you order a package and feel uneasy about not being home when it arrives. No fear! Amazon lockers are located all around the U.S. for consumers to pick up their products. These lockers are located ate grocery stores, gas stations, college campuses, and, you guessed it, BANKS. They have LITERALLY created a business inside of YOUR business.

While in Dallas for a conference last week we had the opportunity to see some of the distribution sites Amazon has around DFW airport; they have warehouses that stretch as long as city blocks. Amazon has adopted its own airline, complete with shiny airplanes with the Amazon Smile labeled “Prime Air.” Speaking of which, can we talk about Amazon Prime same day shipping?! Talk about changing customer expectations! When the consumer needs to wait “3 to 5” business days with most companies, Amazon is out there delivering packages HOURS after a customer places an order!

Amazon Prime Air isn’t limited to airplanes, however. Drones have been designated to deliver packages to customers in under 30 minutes. These unmanned aerial vehicles have the potential to alter and enhance customer service globally and massage the “need it now” mentality society has developed. There goes Amazon again — changing the consumer’s expectations for the rest of us.

B (ezos) – Commerce

Back to the question: How will this affect my financial institution?

The general population’s expectations have adopted to businesses like Netflix, Uber, and Amazon’s efficiency and convenience. Financial institutions will have to accommodate those expectations, as well.

Amazon is growing so fast that if they depend on a business to conduct business, they will either buy that company or just deliver the service themselves. Did you catch that? Basically, Amazon doesn’t want to waste their time on competition or middle men. And it works.

Guess what Amazon’s next target is: the financial services market. Did you know that Amazon has funded more than 3 billion dollars in small business loans? Currently, these loans are only to companies that sell their products through Amazon.com, but the threat is still present. Like many retailers, Amazon encourages customers to use gift cards in order to limit the interchange fees businesses eat on merchant purchases. Not to mention these cards can also automatically be reloaded — nicely done, Amazon. To allow cash to be loaded onto a card certainly is attractive to those without a traditional checking account as well (this goes back to the notion that Amazon literally attracts everyone).

It has not been announced officially, but percolating in the rumor mill is that Amazon is in talks with JP Morgan Chase and Capital One to offer some rendition of a checking account. Imagine the supplemental data that Amazon would be able to mine and utilize if they had access to customer’s spending habits OUTSIDE of their own internal data harvested from Amazon.com.

The Amazon Effect on Your Community Financial Institution

How does this affect community banks and credit unions? Amazon has clearly proven they innovate at the speed of light. Community banking will always have an edge in servicing the customer. Our advice is to make sure that your technology is “sticky” enough to keep your customers pleased and unwilling to consider additional options. And, make sure they have enough options under your roof to make their own choice. Make it pointless to choose a different institution because you offer it all. That is exactly what Amazon has done, and they truly do HAVE IT ALL. When you team this up with superior customer service, your institution will remain in business for years to come. Learn from Amazon, be aware of Amazon, and exploit where they are unable to compete.

Dan Fisher

With over 35 years in the financial industry, Dan M. Fisher has proven himself as a leader in the financial industry holding roles as the former director of the Federal Reserve Bank of Minneapolis and former Chairman of the ABA Payment Committee.