Banks Can Add Amazon and Expansion of Retail Media Networks to the Watch List

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Amazon has expanded its ever-growing spectrum of influence and investment to the financial sector. The e-commerce and media giant is adding a new point-of-sale service to its offerings as a way to compete with payment processing firms and traditional bank technology firms to pursue a broader offering of merchant services. 

Banks will want to take notice. Just last month, Amazon launched Buy With Prime, which allows consumers to use the credit or debit cards stored in their Prime accounts to purchase on other retailers’ websites. The program, in beta with select retail partners, has the potential to extend the ease of purchase Amazon Prime customers have become accustomed to across the retail web.

This is not Amazon’s first foray into the banking-as-a-service trend, as the company partnered with Goldman Sachs in 2020 to offer credit lines up to $1 million to small business sellers on Amazon. On the consumer front, Amazon five years ago launched a credit card with J.P. Morgan and Visa for Prime Members, and three years ago Amazon debuted a secured credit card with Synchrony. 

These developments, along with recent moves into point of sale (POS), attest to Amazon’s interest in being as involved as possible in the end-to-end shopping experience — hence the threat to financial institutions. Yet there are ways for banks to stay in the game in the face of Amazon’s latest moves.

Own the point of commerce

For the last couple of years, nothing’s been hotter at the intersection of serving merchants and consumers than Buy Now Pay Later (BNPL). A recent study found that 4 in 5 shoppers use BPNL to avoid credit card debt, which is why luxury brands have started offering it.

This trend was underscored last year by the company Block (formerly Square) purchasing rising BNPL player AfterPay for $29 billion. Block’s POS app, Square, now offers merchants and restaurants a platform that handles transactions, offers cash-back rewards in its Boost program and a credit system for their customers. The acquisition highlights how financial institutions of all sizes need to own as much of the POS as possible and create marketing strategies that build awareness of the critical role the bank plays in their customers’ shopping journey. 

Drive consumer engagement and merchant value with card-linked offers

Banks experience low digital engagement because people visit their bank app or website primarily to check balances and pay bills. The truth of the matter is—especially with Gen Z and millennials—brands today need to be more focused on becoming the place consumers go as a part of their daily digital rituals. 

Consumers will respond if they know that downloading a bank’s app and checking it regularly will provide both a daily rewarding and helpful, utilitarian experience. This part of the experience should include rewards such as cash back along with other value-adds such as reduced fees for higher balances, free trades, lower interest rates, and so forth. Banks need to think more like engagement platforms (that is, like Amazon) and become a daily ritual when customers trust their banks to facilitate great financial decision making, savings, and rewards as an embedded part of their shopping journey. 

Actualize data for personalization

Banks have always been known to hold the goldmine as related to customer data. Yet, few banks are even approaching Amazon’s level of personalization in their customer experience, and now is the time to close the gap. Whether rewards, offers, preferred communication methods, life-stage personalization, or lowering fees, banks should know enough about their customers to do a better, more “Amazon-like” job with working their data to drive preference and loyalty.

Get merchants involved

Almost every bank serves merchants as well as customers, whether national brands or local merchants in their communities. Increasingly, companies like Block, PayPal, and Shopify are offering unique digital marketing opportunities to their merchants as a value-add. 

In fact, private marketplaces and their retail media networks represent a shift from open exchanges like Facebook and Google and are increasingly popular. Boston Consulting Group estimated that retail media advertising will grow to $100 billion by 2026, representing 25% of total digital-media spending. This growth is largely spurred by consumer packaged goods (CPG) companies, as 85% of them were planning to increase their budgets for retail media networks, per a 2020 Merkle Survey. This relatively new advertising channel is led by the likes of Amazon, Walmart, Target, and Instacart, but also garnering great investment from brands like Wayfair, Home Depot, and Kroger. 

This momentum only serves to highlight the even greater opportunity for merchants and brands to continue investment in one of the largest, most trusted for brand safety and accurate performance measurement, and longest-tenured private marketplaces available today. Banks and credit card companies are also in a unique position to provide cost savings through better transaction economics with their merchants whether on the acquiring or issuing side; this is after all the single biggest expense line item after salaries for most merchants. Combine providing a superior marketplace for merchant advertising with the ability to materially impact a merchant’s bottom line through negotiated processing fees and banks and merchants have the ultimate win-win relationship.

Win with communities

Nurturing communities among merchants and customers is the future for banks. And to compete with Amazon and the growing private exchange marketplace, it’s all about banks developing merchant relationships and safely using their unique data signals to deliver a relevant and trusted customer value proposition every single day across every touchpoint. Banks that adopt these elements, as a part of their evolving commerce strategy, will not only compete with Amazon and growing retail media networks, they may just win!

Farrell Hudzik is the Executive Vice President of Financial Institutions at Cardlytics.