Tuesday Topic: Amazon, Hype or Horror?

Will clients move to Amazon for banking? Through the proliferation of technology in our lives, we now trust what we once found to be unfamiliar and distrusted. As Apple, Google, and Amazon make many aspects of life easy and convenient, initial boundaries about invasion of privacy and restraint of monopoly control fade. Remember when we said, "I don't want someone somewhere to be able to track my whereabouts"?  How long did that last before we activated and agreed to the GPS-locating features of our phones? The reasoning now is simple … we now trust these companies with so much information about us, why wouldn't people trust them with their money?

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Neil Stanley
President of Community Banking
TS Banking Group
Treynor, Iowa
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Original Message:
Sent: 03-13-2018 09:25
From: Barb Rehm
Subject: Tuesday Topic: Amazon, Hype or Horror?

Many community banks view the largest banks as their most serious, near-term competitors and big tech as their most fearsome rivals for the future.

But what if JPMorgan teamed up with Amazon? A nightmare come true? Well that potential combination - in the form of a partnership on a basic banking account aimed at millennials-was the focus of a Wall Street Journal story last week.

It's tempting to dismiss this as folly, and unprofitable folly at that. But if that's your reaction, you should read a new report from Bain & Co. that outlines why and how Amazon could become the third-largest bank in the U.S. Bain is predicting Amazon will "transform the economics of banking" and gain 70 million customers within five years. The consulting firm may be dead wrong, but the report is worth reading if only to consider the possibilities. The icing on Amazon's cake may be customer trust-long the foundation of our banking system. "Amazon has earned people's trust from the easy and reliable search, purchase, return and service interactions that together create a great experience for customers," Bain says.

What to do? Bain has three recommendations. "First, banks should get more serious about putting customers first, meeting their needs in innovative ways rather than pushing products. Second, they will have to learn to move much faster, discarding decision making by committee. And third, they can use new distribution channels by partnering with technology firms so that they can improve their capabilities in data science and experience design." Bain concludes: "If banks don't reorient their approach and radically accelerate their rate of progress, they will watch technology firms steadily poach their business. At first, it will be the unprofitable slice that no one wants. Then the rest of the pie."

How seriously do you take this threat? Is the industry ready? What are you doing to keep up with customers' increasingly high expectations, especially when it comes to technology? Should federal regulators intervene to protect the industry?

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Barb Rehm
Promontory Interfinancial Network
Arlington VA
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