![]() ![]() ![]() The estimate assumes that slightly more than half of Amazon’s estimated US customer base chooses a financial relationship with the firm-the same share of people who said in our new global survey that they expect to buy a financial product from a major technology firm over the next five years. This estimate is based on three assumptions: Amazon achieves the bank account penetration our consumer research suggests 15% of its e-commerce customers pay directly from their Amazon bank account instead of through a credit card and those customers spend at the same level as Amazon Prime customers.īeyond that direct cost saving, we could imagine Amazon’s banking services growing to more than 70 million US consumer relationships over the next five years or so-the same as Wells Fargo, the third-largest bank in the US. Bain & Company estimates that Amazon could avoid more than a quarter of a billion dollars in annual interchange fees in the US alone. ![]() Amazon could make it easy for customers to pay right from that account instead of with their credit cards, which impose an average 2% interchange fee for most transactions on Amazon or its third-party merchants. Amazon might generate revenue through fees and royalties from the bank partner, though the more valuable financial benefit will likely be the savings Amazon realizes from direct access to customers’ checking accounts. The arrangement allows Amazon to avoid dealing with bank regulatory compliance and managing the balance sheet. Rather, the bank it partners with would probably hold deposits, while Amazon would design and manage the customer experience and distribution. Given these two advantages, Amazon’s incremental costs will be almost nil.Īmazon will not legally become a bank. The company can also avoid a lot of the customer acquisition costs borne by most direct banks because it already has digital relationships with so many Americans. Instead, Amazon could steer new customers to “just ask Alexa,” its voice assistant on the Echo device. Start with Amazon’s mission statement: “Our vision is to be Earth's most customer-centric company to build a place where people can come to find and discover anything they might want to buy online.” It can afford to go after this previously unprofitable segment in part because it will be able to transform the economics of banking Amazon does not have the burden of an expensive branch and contact center network, which we estimate comprises roughly 40% of a North American retail bank’s costs on average. Most banks don’t relish serving this part of the market, but Amazon has several good reasons to do so.Īmazon has spotted a segment of customers that it can serve better, and the company can worry about making money later. The checking and debit account components of a banking relationship are notoriously unprofitable, especially for a fee-free model aimed at younger customers who have little money to keep in the account. How can traditional banks respond? Why Amazon would bother Amazon may be moving further into the banking sector. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |