Why it’s our old friend, “Spot the Generational Differences,” back for another round inspired by the news of the day.
ITEM: Amazon (yeah, them again) is reportedly working with banks to develop its own checking account product.
a) About time. Banking has long been in need of disruption, and who better to do it than Amazon?
b) Meh, let’s see them actually do it. Banking’s a lot more complicated than retailing.
c) Depends on what they come up with. If they’re merely slapping their brand name and logo on a conventional product, one that a bank runs, it’s not a big deal.
d) What’s a checking account?
e) What’s a bank?
The addition of banking and financial services to the list of sectors in which Amazon is already in, trying to get in or rumored to be looking at is as understandable as it is predictable. Controlling a piece of the payment system is as integral to its core business of retailing as delivery, another business line in which Amazon is building its own operation instead of relying entirely on outsiders.
Offering financial services and products through its website represents a way for Amazon to generate revenue and cut costs, to have one more line of stuff to draw customers to it and to build more customer loyalty and use (much as the Prime program does).
The caveat is that those aren’t revolutionary ideas. The appeal of offering bank-like products in non-bank settings and through non-bank channels, and of getting a piece of the action of the payment system, has long been strong.
Which is why so many people have tried it and continue to do so.
Sears, back when it was America’s best-known retailer, offered investment services and insurance so that shoppers could “buy their stocks where they buy their socks.” The Discover credit card originated with Sears. Walmart for years tried to get a bank charter; it long maintained that it had no interest in building a major retail-banking presence, although the industry suspected otherwise and fought to keep it out. Microsoft was at one time feared as the entity that would rout the banking industry by tying its personal-computer operating systems, personal-finance software and the emerging technology of the internet together.
You could put together a suite of financial services through Costco. Credit card companies have tried to move into retail banking with savings accounts and certificates of deposit, figuring that they’d save millions by not operating a network of branches. Fidelity can serve as a bank as well as an investment firm; even Goldman Sachs is getting into retail banking.
Success has been limited.
There’s no bank of Microsoft. Sears divested itself of the financial-services stuff years ago. Walmart is focused on being the Amazon alternative in online retailing. And one credit-card bank, operated by Capital One, has been opening physical locations that remarkably resemble branches (although Capital One calls them cafes); there’s one in the South Lake Union neighborhood of Seattle, not far, as it happens, from Amazon headquarters.
People have peeled off little bits of the banking industry — the auto manufacturers managed to clobber the bank-issued car loan by pricing those loans at nothing, or close to that — but establishing a national brand in consumer-oriented retail banking has proved an elusive objective. Not that people won’t stop trying, with Amazon being the latest.
What’s fascinating about the lack of success is that consumers have demonstrated considerable willingness to adapt to the next thing in banking, whether it’s banking by mail, or phone, or plastic card (debit or credit), or the internet or smart phone.
Which brings us to the checking account. Americans are writing billions fewer checks than they were even five years ago, a trend that has affected everyone from printers of paper checks to U.S. Postal Service volumes (how many of you still sit down at the end of the month, write checks to cover your utility bills, stuff them into stamped envelopes and mail them off?).
What Amazon likely has in mind is some sort of e-account into which money can be deposited and payments dispersed. If not exactly innovative, it’s the core product to which all sorts of other financial services can be bolted on, likely all bearing the Amazon brand.
The term checking account will be used merely because it’s one people are likely to recognize, but maybe not for much longer. Ask your kids what a paper check is, much less how to fill one out, and be prepared for some blank looks.
Still, never discount Amazon’s willingness to do the counterintuitive thing. The great retailing disruptor has opened brick-and-mortar bookstores and bought a grocery chain. Perhaps there will come a day you’ll walk into a branch of the Bank of Amazon to open an account, and be asked, “Would you like some paper checks with a picture of Jeff Bezos in the background? And would you like a lovely leatherette checkbook cover embossed with our logo to go with them?”
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.