Page 21 - March 2018 Disruption Report

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Amazon’s banking moment
With a market cap of $700 billion, Amazon is larger than Bank of America and JPMorgan Chase combined. Amazon has become the big foot of America’s retail business, terrorizing the grocery industry with its recent acquisition of Whole Foods. Will Amazon’s next target be banking?
In May 2016, Medium’s Enrique Dans, professor of innovation at EI Business School, warned that the day was approaching when big techs would serve as banks, writing:
Until now, the tech sector has thought that it wasn’t necessary to own a bank to disrupt the nancial sector. But the signs are that some tech companies are increasingly taking on the role of banks. We can easily imagine a future in which these well-capitalized out ts realize that a banking license isn’t such a big deal when it comes to building a sustainable competitive advantage and that they could integrate these services in the future if people accept the idea.
Amazon’s banking moment has arrived. After changing the way America shops, Amazon now wants to change the way its customers pay for their purchases. Amazon is in early discussions with large banks, including including JPMorgan Chase and Capital One, about creating a branded checking account product, targeting Generation Z customers (ages 18 to 24), who do not own a credit card.
“I’m sure Amazon is scaring the hell out of every single regional bank and credit union right now,” said Stuart Sopp, CEO of Current. “The banks have very clearly not serviced these demographics, so there’s opportunity.”
By offering a checking account product linked to a bank-owned ACH network, Amazon would
save approximately $250 million a year in swipe fees. If the online retailer can offer an attractive checking account product, Amazon could grow the proposed checking accounts to 70 million users in ve years, according to Bain analyst Maureen Burnsshe. Some fear that Amazon’s entry into payments may ultimately pose a signi cant long-term threat to the $90 billion-a-year swipe-fee industry.
Bain & Co. analysts Gerard du Toit and Aaron Cheris wrote:
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