CRH Key Points Blog

The Amazon effect and the future of financial services

By January 10, 2018 No Comments

I admit it: I have an Amazon jones.

I love getting stuff delivered to my front porch, rain or shine; it’s an everyday Christmas. And I’m not alone. Jeff Bezos, Amazon’s founder and CEO, has just been named “the richest man in history” on strength of the 2017 surge in Amazon stock price. (Factcheck: the fabulously wealthy Mughal emperors of 16th century India might top even Bezos. Those guys were *loaded.*)

The first banks sold security: they were a safe place for cash. Amazon at first sold nothing more than…books. Why? Easy to ship, easy to sell; I remember the first tiny ads in The New Yorker—and all the financial section news stories about how Amazon would never amount to anything. Well, that whooshing sound you hear is the vacuuming-out of mall cash registers around the world. Amazon has done something extraordinary: in remaking retail, the company has radically changed our sense of our own user experience.

Transparency, speed and ubiquity: everything from travel to financial services haven’t digitized because they want to—they have to, because there’s been a revolution in customer expectations. That’s not all: Amazon is such a force that its search for a second US headquarters, the HQ2 project, has garnered Super Bowl-scale interest.

The key takeaway? Amazon’s approach to business dovetails almost perfectly with millennial cultural values, which, in turn, because millennials are the first wholly “digital generation”, means a laser focus on user experience. Moreover, millennial cultural values are evolving: the millennials, on the brim of middle age, are settling down into parenthood—and a far from universal appetite for home ownership and its attendant demands.

Two massive shifts are underway in financial service organizations (FSOs): the first is the emphasis on user experience as the key differentiator for customers. The second is the downloading of baby boomer wealth as the leading edge of that cohort moves into its seventies. The Amazon effect here will make or break customer relationships with FSOs: increasingly, tangible relationships and personal values will govern customer choice. Amazon’s deepest change may be transparency itself, that what you see is what you get.

If there’s one thing to be learned from the Amazon effect, it’s that digitization doubles down on the human factor: we love stuff digital-fast (e-transfers off our phones and internet service on flights) and those lovely boxes on our porches. But what drives those transactions isn’t just speed: it’s the values governing how you perceive the relationship.

And the deepest of those is connection.

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