Business owners and consumers may want to brace themselves for the next massive Amazon shakeup. Financial analysts forecast that Amazon could one day become a formidable leader in the finance industry. In a short five year period, experts forecast that up to 70 million consumers may turn to the retail giant for banking services. If the experts are right, Amazon will have more banking customers than the United Kingdom has citizens. Is Amazon Bank the future of banking?
Significant changes could loom on the horizon as Amazon negotiates with major financial players such as J.P. Morgan Chase. The retailer wants to create a commercial partnership that serves young consumers and those without banking services.
Amazon’s Going After Top Finance Talent
Amazon Bank employees have a strong background in finance and understand banking. However, the retail giant isn’t stopping there. The company wants to expand, and it’s hungry for more finance professionals. Historically, major corporations such as Google have raided Singapore banks for top executive talent. Amazon, however, is going after Singapore’s top banking technology experts. In Singapore, Amazon Web Services (AWS) is an aggressive recruiter. As of September 2019, AWS has listed nearly 300 job openings in the province, approximately 70 of which are technology openings.
Singapore banks offer AWS a large pool of skilled, experienced finance talent. Many of those professionals are likely willing to jump ship from traditional financial institutions to take their chances with a leading tech player like Amazon. For Amazon’s banking ambitions, Singapore is a perfect storm of opportunity for available talent.
So Far, So Good
Now, the most feared company in America is going after the banking industry. Already, Amazon offers small business loans and indirectly competes against bank swipe fees as well as prepaid card services. Analysts expect Amazon to eventually offer other banking products, such as consumer checking accounts, small business credit cards, and home mortgages.
In 2014, the top thousand banks in the world collectively grossed $920 billion. Now, Amazon wants its share of that pie.
Some banks will benefit by partnering with Amazon, and others may succumb to the mighty wrath of the retail giant. With Amazon’s extensive experience in customer service, they will most certainly provide formidable competition to existing banking networks. Amazon started offering 12-month small business loans of up to $750,000 in 2011. In 2017, the company originated $3 billion in small business loans. So far, the company only offers small business loans to enterprises that sell products in the Amazon marketplace.
In the future, however, the company has shown reliable indicators that it wants to expand its footprint to small businesses outside of the Amazon platform. The company is also going after the 7% of U.S. customers that rely on prepaid cards rather than a traditional bank account. Checking accounts – which are the foundation of consumer banking – may serve as the next conquest for Amazon.
Starting Ahead of the Game
A large part of Amazon’s current business is information – sensitive consumer information. The company has substantial experience in keeping consumer information safe. Amazon also has experience in online retailing, web services, payment processing, logistics, and other expertise that will transfer well to the finance industry. The combined technical acumen of Amazon personnel makes the company a strong candidate for success in finance. The company’s exceptional human capital gives it a massive advantage over most fintech startups, who typically spend their first years finding their way and building a foundation.
Amazon is entering the finance market at the perfect time to take advantage of an industry that’s adjusting to a tech-first orientation.
Today, technology gives consumers more control over their finances and more personalized banking experience. If Amazon goes forward with his plans to enter finance, it could once again revolutionize an entire industry. Most relatively recent finance disruptors have had to build their enterprises from the ground up. Amazon, however, has the benefit of experience, market share, and hefty coffers.
The Amazon franchise is one of the largest enterprises in the world and employs some of the world’s top talent. With its exceptional resources, Amazon could very well become the bank of the future. Rather than seeking a banking charter, Amazon officials have focused on striking solid partnerships in the finance industry. Experts forecast that the retail giant will meet little resistance.
Already, the fintech boom has softened the traditional finance industry. Rather than waste their energy trying to keep Amazon from entering finance, traditional institutions are focusing on competing against existing fintech disruptors.
If the J.P. Morgan Chase Amazon marriage succeeds, the two entities will gain access to a wealth of consumer data.
Amazon already tracks consumer spending, and J.P. Morgan Chase has a massive amount of information about consumer borrowing. Together, the knowledge the two enterprises possess about consumers could give them a significant advantage in the finance industry.
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Ryan Ayers is a researcher and consultant within multiple industries including information technology, blockchain and business development. Always up for a challenge, Ayers enjoys working with startups as well as Fortune 500 companies. When not at work, Ayers loves reading science fiction novels and watching the LA Clippers.