Two-thirds of Prime customers say they would bank with Amazon
A new survey from management consultancy Bain & Company finds that about two-thirds of Amazon Prime subscribers would try a free banking account provided by the ecommerce retailer. The study also found higher levels of consumer loyalty for Amazon than towards regional and national banks.
Back in March, there were rumblings that Amazon was looking to team up with a partner like JP Morgan Chase or Capital One to create a simple digital checking account to, in part, avoid credit card transaction fees on purchases. At the time, Bain & Company surmised that the ecommerce giant – with its strong brand recognition and long-standing digital relationships – could become America’s third largest bank, with 70 million customers, by 2023.
Indeed, Amazon has a lot going for it as a potential digital bank. It has high marks for customer service and experience, a full commercial relationship with customers, no major security breaches thus far, 90%-plus renewal rates on its paid membership program to which a majority of US household subscribe, and the potential for a light physical-branch footprint at its Whole Foods network.
Another big advantage for Amazon is a high level of consumer trust, a factor that is especially important in financial relationships. Consumers are presumably more likely to switch to a financial institution that they trust with their information and money. And while they don’t necessarily have to worry about having to make a run on the bank for fear of it becoming insolvent like in the film ‘It’s a Wonderful Life,’ they still want to generally be assured their money is in ‘safe’ hands. According to an earlier Bain survey, Amazon achieved nearly the trust levels of banks in general.
Now, Amazon can count on another advantage in its banking bid: strong customer loyalty. According to a Bain survey of 6,000 US consumers, Amazon has much higher customer loyalty scores than US banks. Consumers gave Amazon an average Net Promoter Score of 47 – significantly higher than regional banks (31) or national banks (18). The NPS is based on how likely it is for a customer to recommend a company to a friend or relative.
Bain’s report states that Amazon’s strong showing in customer loyalty stems from its two-decade focus on improving customer experience. The ecommerce giant is regularly ranked first in customer satisfaction among retailers.
Meanwhile, the United Services Automobile Association – which offers insurance and financial services to former and current military service member and their families – remains the high-water mark for customer loyalty. However, the organization is an exclusive one that serves a unique customer base.
The core finding of Bain’s study, however, is that 65% of Prime subscribers say they would try a free online bank account offered by Amazon with 2% cash back on Amazon purchases – a similar offer to its cobranded credit cards. Though the tech firm is cagey about its subscription numbers, a rough estimate of the US Prime subscriber base is 66 million – which means about 43 million people would be willing to try the banking service.
Of the Amazon customers who aren’t Prime members, 43% would try the account, while 37% of those who don’t use Amazon would try it. Taken together, Amazon can bank on significant initial demand for its simple banking services.
Bain figures that Amazon can use its initial checking account to be platform for a wider range of lucrative services like insurance and loans. Alibaba has already proven that a technology firm can succeed in financial services through its Ant Financial unit, which reported $95 billion in outstanding loans earlier this year.
Amazon’s reach already extends to America’s most valuable banking customers. Bain’s survey found that Amazon’s customers control about 75% of US household wealth, while Prime members control about 45% of household wealth.
Furthermore, Amazon can count on its mutually reinforcing consumer ecosystem. Once you buy into one part, like Amazon Prime, it’s likely you get enticed into other Amazon products like the Kindle or Alexa-powered Echo speaker. About half of Prime subscribers use a Kindle or Fire TV, while a third use Amazon payment methods like a cobranded credit card or Amazon cash.
