If Amazon offered a free online bank account, nearly two-thirds of Prime members would try it out, according to a new report from Bain & Co. However, only 43 per cent of regular Amazon users and 37 per cent of non-Amazon users would give it a shot.
Bain asked 6,000 U.S. consumers the following question: If Amazon launched a free online bank account that came with 2 percent cash-back on all Amazon.com purchases, would you sign up to try it?
Nearly 70 percent of people aged 18 to 34 said they would try it, while 50 percent of those aged 35 to 54 would do so. Less than 40 percent of those older than 55 answered yes. This demonstrates that people—particularly Prime members—have a lot of trust in the online retail giant.
“Customers interested in banking with Amazon skew younger and slightly higher income than average,” Bain noted in its report. “Those who use only digital direct channels for payment also express more interest than average in Amazon’s entry. It’s worth noting, though, that even among younger consumers, who have the highest adoption of digital-only payments, the majority still use cash and checking as well.”
Last spring news emerged that Amazon was in talks with several banks, including J.P. Morgan Chase and Capital One, to develop a checking account type of service for its customers. Chase and Citigroup have since started working on digital-only accounts to appeal to millennials and other customers.
“The big banks have absolutely woken up to this threat,” Gerard du Toit, a Bain partner and co-author of the report, explained. “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.”
Compared to national banks, Amazon’s customers are much more loyal. It ranked 47 in a net promoter score that measures the likelihood a user would recommend a company’s services. Regional banks got 31, and national banks received an 18.
What makes Amazon banking so appealing is that its checking account could have other benefits, such as an absence of typical banking fees and ease of use, according to du Toit. In addition, ATMs could be available at Whole Foods locations and may be accessible through Amazon’s digital assistant, Alexa.
According to du Toit, the “threat from Amazon is real and imminent” to traditional banks. The move into basic banking would allow the tech giant to directly influence customer’s finances and spending. As it is, about one-third of Prime subscribers already use Amazon payment methods, including Amazon cash and co-branded credit cards.