Will Amazon disrupt finance as well? ‘Banks beware’ warns Forrester
Amazon is considering entering the financial sphere, reportedly considering a chequing accounts service. Forrester’s new report advises bankers how to move forward when a giant enters the playing field.
In early March, The Wall Street Journal reported that Amazon was exploring the idea of building a “chequing account-like product”, with representatives met with JPMorgan Chase. Forrester’s new report ‘Amazon Invades Banking: Here’s What You Should Do’ offers bankers advice on how to respond when such a big player enters the market, saying “if you can’t beat them, join them.”
“Banks beware, because Amazon is coming for your chequing accounts” the report, saying the company’s exploration into the financial sector could help it boost merchant appeal, lower transaction complexity and cost, build stickier and more profitable consumer relationships and expand online shopping across the economic sector.
If Amazon does choose to pursue this route (most likely in the US to start), it will have to offer its chequing account service with an established partner to stay within US regulations separating banks and commerce.
According to Forrester’s report, banks will need to adapt if Amazon enters the financial space and digital business executives should plan now how they will choose to coexist with Amazon rather than fight it.
Here are Forrester’s suggestions on what banks will need to do adapt to a platform dominated world:
- Focus on efficiency and economies of scale: Invest in systems that bring efficiency, security, and reliability. Forrester uses the example of global reinsurer Munich Re providing its clients with balance sheets and underwritings, saying many start-ups choose this firm because of its reliability and ease of integration.
- Lower costs and locate niche gaps in the market: In an increasingly granular market, more consumers are looking for nuanced products tailored to a particular niche. Investing in capabilities that enable flexible product and service design will be essential in what Forrester calls ‘Amazon’s ecosphere’, where diversification will be the primary factor in distinguishing the industry.
- Learn how to set up a stall on Amazon: Forrester predicts that Amazon will have a similar influence on the financial sphere as it has in its other product categories. Therefore, digital leaders and marketers would be forced to work together to develop advertising skills specifically for Amazon.
- Boost emotional appeal: One area where Amazon does fall behind is its connection with consumers and its capacity to make its user-base feel valued. Financial service firms can take advantage of this by developing a culture of excellent customer service and support. The challenge will come from rewiring brains from process efficiencies to customer empathy and figuring out how to embed money management in the everyday customer’s life.
- Be Amazon: Learn from how Amazon built a portfolio of products and services that made it invaluable to the consumption market. Design user experiences built on an understanding of the customer’s ecosystem, keeping in mind the opportunities and practicalities of data sharing.
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