IT’S A WHOLE NEW BANKING WAR
15 MAR 2018
Unless you were off the grid last week, you will probably have heard the rumours that Amazon may be entering the banking arena, with the global e-commerce and cloud computing company engaging in talks with JP Morgan to offer current accounts in the US.
But there’s an ominous scarcity of detail. This seismic event should have shaken the board rooms of every retail bank in the world. And whilst the prospect of Amazon obtaining full banking licences, operations, logistics and so on globally, might seem a tall order any time soon, the starting gun has been fired. Even if Amazon merely partners with JP Morgan, that’s enough to set off a string of similar partnerships, and a round of meaningful disruption.
What the UK retail banks should and almost certainly do fear most, far more than erosion from the fintechs, is waves of attacks on their business by global technology giants; these completely alien life forms have unlimited cash, great innovation, huge databases of loyal customers, and massive brands. Indeed, fighting off the relatively small fintech start-ups even seems to have become a low priority, since the initial panic from 2012. Shovel out a better app, a tip of the cap to Open Banking, attend some fintech shows, and make soothing noises to the FCA, and that’s it; all pretty much parked for now, allowing the old boys to get on with some more serious stuff.
Well, forget it. This is now a different game. And you know the oddest thing about it? Those who were once foes must now become allies. It’s like war: fight those who most threaten you, forget history, and form alliances with those who can reinforce you. If that happens to be your most recent foe, well, so be it.
The big retail banks certainly have most to lose from the threat of Amazon and (coming soon) Google and Facebook. PayPal should not be sniffed at either. The banks know that they are extremely vulnerable. They lack the vision, innovation, spirit, and technologies to greenfield a formidable response. They need the fintechs, and they need them now. The value of fintechs just went up a click or two.
But it’s a two-way street, believe me. For the fintech babies, the Amazon news will have made them soil their nappies. It’s an absolute stinker, too. If Amazon and Google and others become bankers, where’s the long-term role for small digital banks? What’s so exciting about a shouty app-based bank versus the tech appeal of the mighty consumer-centric, all-embracing Amazon with zillions of customers?
The ghastly certainty is that, if the fintech banks want to avoid becoming collateral road kill — crushed by the tech tanks as they roll onto the front lawns of the big retail banks — they need an alliance just as badly as anyone.
We used to talk about ‘ICE’ — Internet Changes Everything. Well now it’s ‘ACE’ — Amazon Changes Everything. Old battles will end, and new alliances will be forged. Banks plus fintechs. It was always the destiny, but now, there is a burning platform called survival.
