When my daughter was very young, she had a favourite dummy. One evening, just before bed, we were alarmed to discover the dummy was missing. As soon as we finally got her to sleep (no easy feat!) I grabbed my mobile, asked Alexa to find my daughter’s dummy, and immediately purchased two for next day delivery. I’m not sure who was happier—my daughter, who was reunited with her beloved dummy, or me, who was able to fix a problem easily, quickly, and painlessly, thanks to Amazon.
The problem with this scenario, of course, is that Amazon does much more than sell dummies. They’ve disrupted nearly every industry with the same level of speed, convenience and customer satisfaction, and now they’ve set their sights on the financial services industry.
If you’re not worried about this tech giant’s potential impact on financial services, you’re not paying attention. That said, there’s no reason to throw in the towel, hand over your bank and admit defeat. Rather, financial institutions can leverage their concern to drive innovation, focus on their strengths and fight back.
Let’s face it—Amazon is entering the banking space with many advantages. A massive pre-existing customer base, unlimited advertising space, and pre-built channels, such as Alexa, the Kindle, and Amazon.com, to name a few. Their biggest advantage, however, is their ability to innovate an experience. Look, for example, at the act of reading. Amazon transformed that experience by taking books, which they’d already mastered, and making them digital. What might they do with something like money, which is already an almost purely digital asset?
One misstep and Amazon could go the way of Facebook, which has spent years struggling with trust issues and data breaches.
Despite these benefits, Amazon faces some challenges. Although they’ve shown that they can mine my data to find the exact dummy I need quickly and efficiently, they have yet to prove they can be trusted with my bank account. One misstep and Amazon could go the way of Facebook, which has spent years struggling with trust issues and data breaches.
This is not to say that financial institutions don’t struggle with being seen as trustworthy by their customers. What this means for a bank, however, is different. Generally, people trust a bank to hold their money, but that trust is tested when they need to resolve a problem or avoid a fee. Trust also wavers by generation. According to a recent PwC survey, 72% of baby boomers trust their primary financial institution the most with their money, while only 53% of Generation Z felt similarly. Less trust means more opportunity for competitors like Amazon.
If banks want to stay ahead of Amazon, they must preserve the trust they have by improving on the things Amazon does well—operational efficiency, transparency, convenience, and a near maniacal focus on the customer.
First, financial institutions must put the right technology platform in place. Amazon is a pioneer of data-driven decision making. Everything from new products to new acquisitions is based on the stockpiles of data they’ve gathered from their customers. If financial institutions want to compete, they must be able to access and leverage their own stockpiles, rather than letting data sit in silos, inaccessible and unusable. To do this, banks must embrace both a single solution to store clean, ready to use data and a single platform that can actually deliver value from that data. Knowledge is power, but only if you know where to find that knowledge and how to use it.
Next, banks and credit unions must go digital. Today’s customers are used to a world with Amazon, Netflix and Uber, where they can get whatever they want, immediately and on-demand. Financial institutions must offer the same options by giving their customers a frictionless experience, whether in the branch or online. Remember, the customer should be at the centre of every interaction. If a process or system is cumbersome for the bank, you can guarantee the customer is going to suffer, too. Convenience is king, and nothing is more convenient than conducting your financial life whenever and wherever you want.
Financial institutions must design experiences for the customer.
At the same time, financial institutions should think innovatively about how they engage with their customers. If you have one platform, then digital isn’t a disjointed experience. You can easily transition from simple to complex products based on the customer’s needs. This means you can think like Amazon, and find ways to meet your customers where they are, in the channels they’re already using.
Finally, financial institutions must design experiences for the customer. You can be in all the right channels with the best platform in place, but if your journey is only designed to make it easier for the bank, it won’t be very effective. If you look at FinTechs that have succeeded thus far, it’s not because the product was cheaper. It’s almost always because they gave their customers what they wanted faster. The biggest winners at this point are going to be those institutions whose maniacal focus on their customers leads to delightful experiences that don’t sacrifice the safety and soundness of the bank.
By tackling these challenges, embracing digital transformation and prioritising customer experience, financial institutions will be able to compete with Amazon and any other tech giants who may want to enter the banking sector. And if Amazon ends up losing sleep over their inability to take over the financial services industry, I’m happy to recommend a good dummy.