Amazon & Square Size Up Cash Management Offerings
(18 September 2018 - USA) Two out of three Amazon Prime customers are open to transaction banking services with the eCommerce group while Square Payments CEO Jack Dorsey also holds plans to “lean into” the growing industry trend towards integrated payments and cash management that threatens incumbent bank majors.
The Amazon research is based on a recent report by management consultants Bain & Co who surveyed 6,000 American retail banking customers. Consumers were asked specifically - “If Amazon launched a free online bank account that came with two percent cash back on all Amazon.com purchases, would you sign up to try it?”. The positive reaction was significantly greater than the proportion of regular Amazon customers (43 percent) or non-Amazon customers (37 percent) who would be open to linking cash management facilities, indicating strong loyalty to the premium Prime product offering. Rumours first began circulating in March that Amazon was seeking to link up with Capital One and JPMorgan Chase to develop a cash management product for customers. Amazon has recently become the latest big US tech group to have its business model examined by Brussels after the European Commission announced that it had launched an investigation into how the ecommerce group uses data about merchants. Margrethe Vestager, EU competition commissioner, said that the preliminary probe focused on the online retailer’s dual role as a competitor, but also host, to third-party merchants that sell goods on Amazon’s websites
Amazon outperforms banks in consumer loyalty by a considerable margin, achieving a net promoter score (NPS) of 47, indicating a high likelihood that customers would recommend the company's services favourably as opposed to a score of 18 among national banks and 31 for regional banks. A checking account would eventually serve as a launching pad for other financial services, including personal loans, insurance and investments, he said. That is the bigger threat for banks, since those products are typically more profitable than checking accounts and people often buy those from their main financial institution, du Toit said. Amazon customers control about 75 percent of total U.S. household wealth, according to the survey. Amazon is also considering opening as many as 3,000 new AmazonGo cashierless stores in the coming years in what presents as an aggressive expansion that would threaten convenience chains, fast food and quick-service retailers.
"The big banks have absolutely woken up to this threat. They're very focused on Amazon-proofing their business because they recognize that it's big tech, not the other banks or fin-tech startups, that's the real competition. Tech firms are the ones setting expectations for what a great customer experience looks like. You put all that together and say, 'Wow, if Amazon does go into banking, it could be massively disruptive in a way that's orders of magnitude more significant than anything seen before” said Gerard du Toit, a Bain partner and co-author of the report.
Square payments is reportedly considering "lots of ideas" in the savings product category in addition to methods for customers to trade equities, Square CFO Sarah Friar stated. "Anything you do today with a bank account, you should look to the Cash App to begin to emulate more and more of that. While this is still just an idea, the sheer amount of money the average customer is storing on the app sparked talk of the possibilities. It's definitely a big balance. And we're starting to think about, are there other things we could do for our customers there? Maybe help them with their savings — how can we help them make their money work for them?" she said.
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