Brendan Wallace, co-founder and managing partner of Fifth Wall Ventures

Recent moves by online retailer giant Amazon point towards it diving into the area of financial services. The company is already offering payments services and seeking fintech startups in countries like India and Mexico, according to a research report by CB Insights.

In India, the firm has a doorstep cash-pickup service that allows customers to load money into a digital wallet, and it has invested in startups Emvantage Payments and BankBazaar. In Mexico, Amazon has a cash payment service offered as an alternative to a credit or debit card.

A sizeable amount of the financial industry is terrified by the prospect of these retailers and data companies making their way in their territory. According to Bloomberg, Keith Noreika, who was acting head of the US regulator for national banks, highlighted in November the need for a separation between commerce and banking.

In September, IBSI reported that four-fifths of IT managers in major retail banks believe that there will be a skills crisis by the year 2022. This is only a result of the momentum that GAFA companies (Google, Apple, Facebook and Amazon) are gaining in the industry, which will make the best talent flock towards these companies.

“Amazon, Google and Facebook own two critically important items when it comes to being successful at consumer payments and loans: the data and the relationship with the customer,” said Brendan Wallace, co-founder and managing partner of Fifth Wall Ventures in the same Bloomberg story.

Amazon’s lack of traditional banking services in the US is made up by its payments and lending platform, which are growing by the minute. Over 33 million people use Amazon’s payment system, and it has lent more than $3 billion to merchants on the platform since 2011. Early last year, the company introduced Amazon Cash, where users can load funds onto their Amazon account.

Last year, research from Peru Consulting found that as soon as GAFA start to offer banking services, more than a third (36%) of consumers would consider switching to them, rising to half (50%) among 25 – 34 year olds.

When asked why they might consider the change, 41% of consumers said GAFAs would probably offer better technology, with 40% citing the potential of more innovative products and services.

According to the research, the risk posed by GAFA innovation appears to be seriously underestimated by banking IT leaders and their boards of director.  Less than 5% of respondents identified the temptation of new technology, such as mobile apps, as the biggest reason for customers to switch banks.

by Henry Vilar
Henry is Junior Reporter at IBS Intelligence, follow him on Twitter or contact him at: