Next CU Competitor: Amazon Bank?

on 11:05 AM

Will the Amazon Bank be a real competitor for CUs in the near future?  Some pundits quoted in a Finanical Brand article think so, and share their reasons for thinking so. 

Besides being the online retailer used by the masses, Amazon has moved into cloud-based storage and computing services, launched music and video streaming services, experimented with old-fashioned brick-and-mortar retailing, bought upscale grocer Whole Foods, and reportedly is looking at pharmaceuticals and home furnishings.  So, can banking services
be far off?

A survey of 133,000 consumers says they trust Amazon and PayPal with their money nearly as much as their banking provider. Fifty-five percent say they're are open to buying financial products from established tech firms. More importantly, 73% of millennials say they'd be more excited about a new financial service Amazon, Google, Paypal or Square than from their financial institution.

If a tech giant like Amazon moved into banking, it would enjoy major advantages over traditional banks and credit unions: better data, a superior user experience, a digitally-native platform, and tremendous customer loyalty. That’s why almost half of all financial institutions consider tech companies like Amazon, Google, Facebook and Apple to be a “significant threat,” according to studies.

Amazon already offers . . .

  • credit cards
  • a quasi-debit card (Amazon Cash) that allows deposits up to $500 into Amazon accounts from 10,000 retail locations like 7-11 and CVS
  • short-term business loans from $1,000 to $750,000 to sellers on Amazon. Business loans are approved within 24 hours, and usually used for inventory financing and business expansion. Amazon can intercept the merchant’s sales revenues if the company falls behind on loan payments, allowing Amazon to make riskier loans. As of 2017, Amazon lending surpassed $3 billion in loans to small businesses since launched in 2011.

Of concern to banks and credit unions, the current head of the Office of the Comptroller of the Currency (OCC) argues that laws separating commerce and banking are outmoded and that the centuries-old separation should come to an end. He argues that if a commercial company can deliver banking services better than existing banks, consumers end up being hurt by making it hard for commercial business to do so.

Read the article in entirety.