Bain survey shows customers are interested in banking with Amazon

Amazon
CEO Jeff Bezos has to happy with the latest survey results from
Bain about its prospects in banking.
REUTERS/Joshua Roberts

• Amazon is considering offering banking services to customers,
  according to published reports.
• Many consumers would be interested in a free checking account
  from the company, Bain found in a new survey.
• Although interest is highest among Amazon Prime subscribers,
  even customers who don’t shop at Amazon would be interested in
  such an account, the consulting company found.
• Amazon’s potential in financial services could be
  particularly threatening to traditional banks, because consumers
  are far more loyal to the e-commerce giant, Bain found.

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.

Bain & Co.

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.”

Bain & Co.

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.