Frenemies: Why Apple and Amazon are Positioned to Partner… and Compete with Banks

Recently, Goldman Sachs partnered with Apple to go to market with a new credit card. In today’s business climate a clear, well thought out strategy as to who to partner with and who not to is crucial for fintech firms, technology leaders, banks and credit unions.  

A Trusted Brand Will Always Be Crucial in Financial Transactions

What is rarely discussed is how important a brand is in any business cycle. One could argue that the traditional financial advisor has a brand to thank such as JP Morgan Chase for holding on to its wealth management clients despite pressure on fees and services. However, it is important to think of brand in the context of a business that is in the midst of massive transformation. A brand built since the 19^thcentury is not necessarily the brand that wins the day in the long run. Consider the fact that Forbes may have had a great name for business, but it was run over by the faster and more modern companies that built new brands online that became just as trustworthy. Companies like Bloomberg were able to compete when the internet came the primary source for news and information. In the 90’s Bloomberg was the up and coming brand, but had already established itself by the end of the decade, and could beat its traditional competitors such as Reuters, and its new competitors in the news and information industry such as Forbes and Businessweek… now a Bloomberg product bought for about $5 million and a whole lot of debt several years ago.  

What does this have to do with the banking Industry? The answer is that while the industry should be concerned about new alternatives to banks such as alternative lending services, the real emerging powers will be established brands that people trust as much as banks to perform bank functions. The companies to watch, consider partnering with and yet be cautious of are the traditional technology and ecommerce brands.  

The Brand that Controls the Customer Has Power

Consider the fact that by some accounts, almost half of all Americans are already banking from their smart phones. As quickly as the tech age is moving, it would not be outlandish to think that number goes to 75% by 2021. Asia payment apps are bundled together with ecommerce, chat and even ride services.   Every good banker knows the power of performing multiple functions for a customer so that he/she is more likely to stay.  

If Apple, Amazon, Facebook and other household names that are as strong as Bank of America in terms of name recognition and in some cases even more trustworthy can control market share they will be able to dictate terms with bank partnerships because they are the ones that control access to the customer.   

This is not necessarily bad news for banks. Technology can streamline costs, and banks have strong lobbying power.  Perhaps most importantly, compared with other industries that have gone through similar transformation, the entire economy hinges on a healthy, vibrant and trustworthy banking industry. The industry, however, will need to stay on top of the trends and the partnerships necessary to be successful, and demand what they need from the government to keep the banking industry stable.  

But change is coming and will only accelerate. The Economist recently reported that in 2000 the Netherlands had more bank branches per head than America, but now they are down to 1/3 as many. Considering the U.S. has also decreased branches, consider it a given that the banking industry is about to hit the gas pedal and big technology and ecommerce brands will be a major factor.