We know what you are thinking: How could Amazon’s Jeff Bezos make any more news in 2019 than he did in 2018 with the run-up to the selection of the New York and Washington, D.C., regions for its new East Coast hubs?
The answer: Plenty, at least when it comes to financial services. Decisions that Bezos & Co. are poised to start making this year could have a long-lasting impact on consumer and commercial banking as well as payments. What’s more — and even a little Twilight Zone-ish — is that banks may be underestimating the nature of the threat.
Recall that the Amazon-in-banking headlines were coming fast and furiously in February and March:
· The online retailer reportedly put out requests for proposal to JPMorgan Chase, Capital One and perhaps others to partner on an Amazon-branded checking account
for young consumers and the unbanked.
· Amazon was said to be planning to offer a co-branded credit card
to certain small-business customers with JPMorgan or other banks.
· It had been looking to hire a mortgage industry veteran to head a newly formed home lending division, according to one report.
· And it had already teamed with Bank of America to make loans to merchants that sell goods on its website, according to another story.
It will be interesting to see which of the pending projects Bezos pursues, how they are structured, how they will interrelate and who will be driving the bus: tech executives, or bank CEOs?
Unlike nonbank threats in the past (can you say, “Walmart?”), the banking industry did not respond with the usual protest and outrage. In fact, many executives have said that banks have little to fear from Amazon.
But are they being too blasé about Amazon
and other tech heavyweights?
The concern among some is that banks could lose vital parts of their business to many different nonbank competitors, or lose control of customer data. Amazon started Amazon Cash in 2017 to allow it take cash deposits from convenience stores, Apple and Samsung are offering their own payment apps, and tech companies could become major distributors of products and services
through voice-controlled devices.
And the Office of the Comptroller of the Currency pushed ahead on its special-purpose charter for fintechs
that could draw applicants if and when more regulatory issues are resolved.
In essence, banks could be bypassed in key profit centers.
"This is a classic missing the forest for the trees, looking at the charters," Karen Shaw Petrou, managing partner of Federal Financial Analytics, warned early in the year. "Who needs a charter?
[Big tech companies] can offer the structural equivalent without one."
Bezos’ decisions in 2019 about where to take its pending banking initiatives will go far in determining the winners and losers in financial services in the long run.