Dr Louise Beaumont

Dr Louise Beaumont is Strategic Adviser at Sapient Razorfish and co-chair, techUK Open Bank Working Group. She creates markets, enables scale and drives growth, with a particular interest in the intersection between technology, financial services and the public sector. She has worked with blue chips, startups, investors and everything in between to grow companies and create value.

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Banks Beware: Amazon isn’t Just Coming for Retailers

Data, trust and scale. Banks need to realise none of this is science fiction, it is history, with Amazon leading the charge, and Google, Facebook and others eagerly following.

As per recent news reports, Amazon is in talks with Indian alternative lender Capital Float for an investment of around $10m. The e-commerce giant is reportedly also in the final stages of closing an investment of around $15.7m in India’s first online-only insurance company Acko. The deal is expected to see Amazon co-create financial products with Acko - besides being its distributor - in the first such move by the web retailer. These investments by Amazon in the financial services space should not surprise anyone, as it has already made strategic investments, including a stake in marketplace lender Bankbazaar. But banks should be concerned.

There’s a lot of discussion about whether these ‘tech titans’ will want to become banks but it misses a crucial point: they don’t need to become “a bank” to deliver financial services.   

Data, trust and scale. These are often cited as the three core elements to ‘winning’ in financial services, the implication is that the banks have these in abundance. However that is dangerous and misleading.

Why? The Tech Titans are approaching financial services not as a series of products to be pushed but through the prism of service, and they are doing it in a way that works for them and their business model.   

This includes the use of APIs, which, Amazon, Facebook, and other firms already have a much firmer grasp on than banks and other financial services companies. Banks tend to focus, either on the technology, or the complying with a regulation, because they are engineered towards that way of thinking.   

As a consumer today you use Amazon Balance, a facility you can top up on and offline; you use AmazonPay to pay for services; and, if you’re a Prime customer, for every purchase via the facility, you get 2% cashback. That looks an awful lot like a bank balance, with one click pay that also incentivises you to spend with the benefits a bank-issued card might provide. With ‘Amazon Pay Places’, customers can pay for in-store and order ahead shopping experiences using their Amazon app rather than with a card or cash, using their Amazon account information.

It also provides online merchants with the ability to add a button on their websites’ checkout pages that let shoppers pay via their Amazon account info. The idea there is that by doing so, customers are more likely not to abandon carts and checkout is sped up. So there you have funding, payments, credit/lending facilities for SMEs all within one ecosystem. Doesn’t that sound a lot like a bank’s services?  

Okay so how about scale. Amazon Prime, which was introduced in India around mid-2016, is estimated to have a base of around 2 million customers with over 11 million prime eligible products. The online retailer sold more Prime subscriptions in the first year of launch in India than it sold in Prime's debut year in the US, with 50% of Prime members coming from non-metro cities. They have the brand, they have the service, and they have the data. Their communication is far ahead of most banks.

The Amazons and Googles have already figured out the tech foundation, the ability to mine the vast swathes of data they hold and are now applying it to find and serve un-met and under-served needs.

Amazon’s logistics and delivery infrastructure, its access to personal data about purchasing habits and patterns, places it in a unique position. Far more so, I would argue, than Google. It has the insight, the infrastructure and most importantly the vision to build and deliver, at scale, the next generation of financial services. It also has the service design ethos that makes people want to take up their latest offerings.

With that power, it can reimagine what financial services looks like through adjacency at scale. You can easily foresee how Amazon will be able to anticipate spending patterns, comingle data from its various services to meet un-met or under-served needs, or help SMEs avoid overdraft charges through flexible funding facilities that take into account the cash flows that it can see through historical data and project into the future – including tracking against similar businesses on Amazon marketplace.

These services – the key word being ‘services’ not banking products – will dynamically flex and flow with consumers and businesses as their lives and financial needs change. Not on a yearly review basis, but in real-time through the data that sits within their ecosystem.

This doesn’t even take in to account an entire swathe of its business called Amazon Web Services, the cloud computing business that is quietly helping to reshape how the financial industry works, with banks of all sizes relying on AWS for storage, processing and analytics. In essence, Amazon is already running the banks and now it’s competing directly for large portions of their revenue streams. Service by service, need by need.

Data, trust and scale. Banks need to realise none of this is science fiction, it is history, with Amazon leading the charge, and Google, Facebook and others eagerly following.    

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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