Amazon set to flood Australian financial sector

The arrival of online chameleon Amazon, confirmed last month by the Seattle-based retail powerhouse, is going to shake up a lot more than just Australia’s $330 billion retail sector, according to Joel Norton, CEO of customer experience agency Kalido.

An expert across customer acquisition, segmentation and loyalty, Norton told AB+F that Australia’s financial services sector is unprepared for Amazon’s extraordinary capacity to product-hop across industries and products and then vertically integrate to scale at pace – a commercial attribute that is redefining customer experiences and expectations.

“Obviously, they (Amazon) are looking to expand into financial services and they would do the same thing in Australia,” Norton said. “And just look at the way they’ve disrupted so many other sectors.”

What started innocently enough as an online book shop now leverages deep data to deliver everything, almost everywhere, almost instantly. From fresh food and fashion to toys and TV. Amazon’s market ­capitalisation presently stands at about $US435 billion ($A578 billion), almost double the value of Australia’s entire retail sector.

The fastest company to ever strike $US100 billion of sales in a calendar year, Norton said the online juggernaut was very good at being able to understand customers while leveraging customer data and then being able to “deliver new product categories and deliver exceptional customer experiences”.

Vast consumer choice

Carving a swathe through once inert consumer expectations, the Amazonian strategy of vast consumer choice and single-click payments is, at this stage, a bridge too far for Australia’s comparatively adolescent online services – across sectors beyond retail, including vulnerable financial services incumbents.

“Ultimately Australian financial services have to fast-track their investment around customer data and the infrastructure to deliver better experiences. Some banks have started … but most are struggling with it."

The problem, Norton added, is that Australian banks are failing “to understand their customers as individuals".

"They’ve got so much data. But then how do you combine customer data and technology to deliver personalised one-to-one experiences in real time, based on a trigger through customer data based on historical interactions?" he asked.

“That’s what Amazon does really well. I get all these communications driving me back to the website They proactively make recommendations to me.”

Norton said these interactions are simply, “about being relevant".

“The bank that I’m with is very good at proactively offering me credit card increases, but there’s other areas where they can capitalise – they have the data where they could make proactive recommendations.”

Raising the bar

According to Kalido, one of the most telling statistics as far as Amazon and Australian retail is concerned, shows the disparity in online sales conversion: for Amazon that conversion rate is more than five times what it is for Australian retailers. For Australian shoppers on the Amazon site it is at 49 per cent and for Australian retailers it's just 10 per cent.

While Amazon is raising the bar on consumer expectations around customer service and brand experience, the blowback for Australian online providers is it makes them “more susceptible to churn".

“Consciously or unconsciously consumers start expecting similar experience across categories. So, if Amazon or other tech brands - Uber, Airbnb - can provide better experiences, why can’t my bank or my telco or my insurer do the same?"

Norton said the resulting increase in expectation by consumers equates to a potentially sector-skewering equation: “that if my bank or insurer has all this data on me, why aren’t they providing me a better service experience?”

According to Citibank, Amazon could reach $4 billion in sales in Australia in five years - the equivalent to 15 per cent of online retail spending. The cross-pollinating, code-hopping online giant is now capturing one out of every two dollars spent on the internet in the US.

“In the overseas market they’ve already got Amazon Store card, Amazon Visa card. They’ve got pay options with amazon facilities on third-party website so I can actually check out using my amazon account. They’ve started lending finance to SME’s around the supply finance program. They’re also doing acquisitions around a payment company in India.

“So, notwithstanding there are some barriers to entry, it’s not unrealistic to expect that Amazon could provide financial services in Australia as well,” Norton concluded.

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