Amazon is likely to find some ready customers if it follows through with its reported plans to launch a banking service.
And that could be bad news for traditional retail banks.
Significant portions of consumers — including nearly two-thirds of Amazon Prime subscribers — say they would sign up for a free checking account from the e-tail giant, consulting firm Bain & Co. said in a new report. Meanwhile, consumers expressed much more loyalty to Amazon than to national or even regional banks, Bain reported.
“Our survey suggests that Amazon can count on significant demand for basic banking services,” Bain partners Gerard du Toit and Aaron Cheris said in the report. They continued: “The threat from Amazon [to traditional banks] is real and imminent.”
The Wall Street Journal reported in March that Amazon was in talks with JP Morgan Chase to partner on a banking account that the e-tailer would offer to its customers. The report followed months of speculation that the company had its eye on entering the financial industry. Amazon has yet to officially unveil any banking services, but it’s widely expected to do so.
Consumers are interested in banking with Amazon
Consumers are likely to be receptive if it does. Some 65% of Amazon Prime subscribers would sign up for a free account from the company if it came with 2% cash back on their purchases from the company, Bain found in its new survey.
But even many non-Prime members are interested. Some 43% of Amazon customers who aren’t subscribers said they would sign up for that kind of free account from the company, as did 37% of consumers who aren’t Amazon customers at all.
Perhaps more ominously for traditional banks, younger consumers were more interested in a banking account from Amazon than older ones. More than 60% of consumers aged 18 to 34 said they would sign up for a free banking account from Amazon, according to Bain’s report. By contrast, fewer than 40% of consumers 55 and older said they would.
Younger consumers are generally more likely to switch their financial service providers than older customers.
But also troubling for banks, interest in signing up for an Amazon checking account increased with income among consumers of all ages. More affluent consumers tend to be more profitable for banks than less affluent ones.
Amazon customers are loyal; bank customers, not so much
Amazon also an opportunity because it’s earned much more customer loyalty than banks have, according to the report, drawing on their comparative Net Promoter scores. Those scores represent the difference between the portion of survey respondents who are highly likely to recommend a company to their friends and family and the portion who likely wouldn’t or might even disparage it.
The e-commerce giant had an overall Net Promoter score of 47 in Bain’s survey. Regional banks, by contrast, collectively had a score of 31. National banks scored an 18.
Banks had a lower Net Promoter score among those who are interested in signing up for an Amazon bank account than among those who weren’t, du Toit and Cheris said in the report.
“For banks, the level of customer loyalty will likely serve as a leading indicator of defection,” they said. “The more displeased consumers are with their bank, the more willing they are to consider Amazon.”
Should Amazon get into financial services, it will be tapping into an attractive customer base. Amazon customers tend to be wealthier and have higher incomes than the average American, according to Bain’s data. The company’s customers on the whole account for some 75% of the nation’s wealth, while Prime customers alone control some 45%, according to the consulting firm.