Amazon’s recent acquisition of Whole Foods caused severe disruption in the American grocery marketplace. Wal-Mart and Kroger both saw their stock lower the morning of the announcement. Not surprising though, as it had been heavily-speculated and widely-reported for years that Amazon was looking to venture into the grocery business, including home delivery and traditional bricks-and-mortar shops. All grocery behemoths were anticipating this and carrying out due diligence and impact analysis for this acquisition disruption. Not all disruptors are traditional, however. Let’s not ignore that a digital threat exists to other industries including the U.S. financial services sector if Amazon enters this space.
For example, in 2012, Amazon opened up a finance service for small businesses that conduct their business on the Amazon platform. Branded as Amazon Lending, the e-commerce giant conducted over $1 billion in small-business loans to its Amazon Market vendors in the U.S. in 2016. What if this model expanded to small businesses that don’t conduct business on the Amazon platform, how would that affect the financial services industry? Then imagine if this lending program expanded beyond small businesses to individuals and corporations, offering every type of loan and financial transaction service. According to a 2017 Accenture survey, about one in three banking customers would consider switching bank accounts to Amazon, Google, or Facebook. Of course regulations would have to be passed before these companies could sell us these types of services, but the consumer demand is there.
We already know that bank branches are on the decline and will eventually become obsolete. Millennials barely know their local bank branch, choosing to conduct their financial transactions over mobile apps and even more of this generation are using robo-advisers which replace human interaction altogether. Banks who remain stagnant are going to fail. According to the Digital Disruption of the Retail Bankingreport by Business Insider, “Banks that don’t act fast are going to lose relationships with customers. Consumers are increasingly opting for digital banking services provided by third-party tech firms. This is disrupting the relationships between banks and their customers, and banks are losing out on branding and cross-selling opportunities.”
So how are you going to target the millennials who might not have brand loyalty, distrust advisers, and who largely use third-parties to facilitate their financial service needs? In the same vein, how are you going to identify and personalise to the Generation Xers and Baby Boomers who split their banking activities between mobile and in-branch visits? Knowing who your customer is, their preference for conducting certain types of transactions, and through which channels is key to personalisation and is no longer an advantage, but is crucial for survival.
For more information on creating your own digital disruption to see off potential threats to your market, contact Boxever.