In the last years, Amazon transferred into the cloud with web storage, began providing video and music streaming services, bought the grocery Whole Foods. And now, they are considering getting involved in pharmaceutical and home furnishing industries and even banking.
The reason for all these investments may be due to the fact that Amazon’s stocks are in parallel correlation with the company’s growth rate and potential in future. From this point of view, it makes sense that Amazon is in need of trying adjacent sectors and markets in a continuous manner. In order to keep the value of its stock price, it is inevitable that Amazon needs to be involved in the finance area.
This is alarming for the providers of traditional banking. In a survey conducted by Bain & Company in 22 countries, the participants commented that they trust Amazon and PayPal the same way they trust their banking providers. 73% of the participants said that a financial offer made by Amazon, PayPal, or Google excites them more than an offer that their traditional bank makes.
If the rumors become true and Amazon decides to get into the business of banking, than it would possess significant advantages over normal banks and credit unions. These advantages include having an enhanced data, greater user experience, advanced digital platform and consumer loyalty that exceeds. This is why a study fielded by Infosys Finacle concludes that technology companies such as Amazon, Facebook, Apple and Google are considered to be a “significant threat.”
Amazon already offers credit cards and Amazon Cash which is a like a debit-card which allows its users to make deposits up to a limit of $500 into their Amazon accounts from a vast variety of retail stores such as CVS, GameStop and 7-11. The company also provides short-term loans with lower interest rates. In June 2017, Amazon stated that they provided $3 billion worth of loan since 2011. One thing is for sure, Amazon starts to look like a bank each passing day.
Considering Amazon’s involvement in credit cards, loans and payment services, it only makes sense that the company would offer retail banking services very soon. It is foreseen that Amazon may attain rather a small or a medium size bank in the year of 2018 to observe the regulations and acquire experience in the area.
Most of the experts in the field agree that if Amazon gets into the business, the company will possess a presence and—small and large—all of the financial institutions in the sector will feel its significant impact.
In the past, the Bank Holding Company Act prevented companies in commerce from participating in banking sector. However, times seem to change. The temporary head of the Office of the Comptroller of the Currency (OCC), Keith Noreika, points out the fact the act’s origins can be chased back to the 18th century. He considers the law is not up-to-date with the new developments and needs to be reconsidered.
All this does not come to mean that traditional banking providers need to fear the future. There is no reason to feel threatened by the digital system providers such as Amazon because neither Amazon nor others like Google, Facebook or Apple can dominate the sector of traditional banking with one forceful move.