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Amazon to Partner With JPMorgan Chase on a Checking Account

The Wall Street Journal reported that Amazon is in talks with a number of big banks, including JPMorgan Chase, about building a checking-account-like product. The article states that:

"The effort is still in its early stages and may not come to fruition. The talks with financial firms are focused on creating a product that would appeal to younger customers and those without bank accounts. Whatever its final form, the initiative wouldn’t involve Amazon becoming a bank."

Do Consumers Want a Checking Account From Amazon?

Cornerstone Advisors conducted a survey of 2,015 US consumers between the ages of 21 and 72 who own a smartphone and have a bank account, and asked respondents what they would do if Amazon: 1) Offered a free checking account, or 2) Offered a checking account bundled with other services like cell phone damage protection, ID theft protection, and roadside assistance, for a fee of $5 to $10 a month.

For each account option, survey participants were given six responses to choose from, but for ease of analysis, I've aggregated the answers into three: Would open it, would consider it, and wouldn't open it.

Overall, about a quarter of consumers would open the free account and a third would consider opening it. What's interesting, though—and perhaps surprising—is that a slightly larger percentage of consumers would open or consider the bundled, not-free account.

The overall results belie the generational differences. I can't imagine that it would surprise you to find out that younger consumers are more interested than older consumers in either type of account from Amazon. But I split Millennials into two sub-segments—Young Millennials in their 20s, and Old Millennials in their 30s—and found that more 30-somethings express interest in an Amazon checking account than the 20-somethings.

Nearly half of older Millennials, and more than a third of younger Millennials would open a bundled checking account from Amazon and pay a monthly fee to do so.

Even though the percentages of Gen Xers and Boomers who are interested in an Amazon is much lower than among Millennials, what's noteworthy is that for both of those generational segments, there's virtually no difference in interest between the free account the fee-based account.

The Impact on Banks and Credit Unions

In one respect, the potential emergence of Amazon into banking won't impact all financial institutions equally. Because of the underlying age differences in the customer/member bases of different types of FIs, an Amazon checking account would disproportionately impact megabanks.

MegabankLarge
Regional
Bank
Community
Bank
Credit
Union
Unbundled (Free)
Would open it35%22%12%15%
Would consider it34%32%33%30%
Wouldn't open it31%46%55%55%
Bundled ($5 to $10 Monthly Fee)
Would open it40%25%12%14%
Would consider it37%35%39%41%
Wouldn't open it23%39%49%45%

Source: Cornerstone Advisors survey of 2,015 US consumers, Q3 2017

Among consumers who consider one of the megabanks their primary financial institution, 40% would open a bundled, fee-based checking account from Amazon. That percentage drops to less than 15% among consumers who call a community bank or credit union their primary FI.

So only the megabanks have to worry about Amazon? Hardly. The smaller financial institutions are already challenged in attracting younger consumers to their institutions. An Amazon entrance into banking will only make it harder for them.

The story here isn't simply consumers' interest in getting a bank account from a non-bank. There are two important takeaways: 1) Consumer's willingness to pay a fee for a checking account bundled with value-added services, and 2) The emergence of Amazon as a new distribution channel for banks and credit unions. 

For more insights into this research, download the white paper Reinventing Checking Accounts here.

Ron Shevlin
Director of Research
Cornerstone Advisors

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