Banking institutions in the United States should stay on guard in the next five years with regards to their status in the banking sector.
This developed after Bain and Co made an estimate that e-commerce giantAmazon could get as much as 70 million US customers within five years if it decides to enter the banking business.
The analysis by the firm’s banking and payments lead Gerard du Toit and retail head Aaron Cheris also state that if Amazon could get 70 million US customers it could equal the size of the country’s third largest bank, Wells Fargo.
The firm made the analysis after it was reported to the media that the e-commerce behemoth has begun talking to banks, including JPMorgan Chase and Capital One, about developing a checking account-style product for its millions of customers. Bain and Co revealed the planned tie-up of Amazon with some banks would allow it to skirt regulatory barriers.
The firm also added that Amazon’s move could be considered as a Troja Horse since they can save on interchange fees while moving into other more lucrative financial products.
If realized the move will allow Amazon customers to pay right from their Amazon bank account instead of with their credit cards.
Bain and Company said Amazon’s move will save the company more than a quarter of a billion dollars in annual interchange fees in the US alone. The firm explained that they made the estimate with the assumption that Amazon would actually have a financial relationship with up to half of its customer base, the same share of people who said in a recent Bain survey that they expect to buy a financial product from a major technology firm over the next five years.
Bain made a warning that US need to reorient their approach and radically accelerate their rate of progress, Amazon and other technology firms would take over their business.
The firm said at first the Amazon approach will not succeed but eventually it would result in success in the future.