Get used to hearing it now, because it may become a reality. As Compass COO Maëlle Gavet recently told the audience at Inman Connect New York, "what Amazon has done to retail, someone is going to do to real estate." That someone could be Amazon.
Several weeks ago, it was reported that Amazon was talking to large financial institutions about offering customers simple banking services. Then, HousingWire reported that Amazon is likely looking to enter the mortgage industry and is already looking to hire a head for its new mortgage lending division from a nonbank in the top 10 HMDA lenders.
Consumers Open to Banking with Non-Lender Tech Companies
Mortgage lending is a gigantic industry, topping $9.33 trillion just in the last quarter. With name recognition and a customer base like that enjoyed by Amazon, plus the many studies that have shown young consumers amenable to the idea of banking with major technology players like Google and Amazon if they offered banking and mortgage lending services, Amazon Mortgages may be a reality before you know it.
Amazon is Not Alone Moving into Banking
If Amazon does move into the mortgage space, it wouldn’t be the first non-banking company to do so. Costco Wholesale offers financial services products, including mortgages, through a third-party lender. The Home Depot offers home improvement financing up to $40,000 through a third-party lender.
Why Amazon Mortgages Could Succeed
Amazon is famous for making everything easier. It’s what they do. Their 1-click ordering, next-day delivery, and algorithms that track what you purchase in order to make suggestions that facilitate future purchases have set the online shopping platform apart. Amazon has also shown a willingness to expand into new areas and to make large acquisitions to power future growth. Not only are they delivering their own goods, they also recently purchased Whole Foods and are now seen as dominant players in the online grocery delivery business.
A report last fall from McKinsey found that the sales and origination side of banking accounted for 65% of industry profit, and that’s precisely the area where Amazon would be able to make a big impact. In terms of financial services, Amazon is already making small-business loans and finding ways to cut into banks’ swipe-fee revenue.
Stay tuned to the Velocity Title blog to see where this story is headed and what it may mean for your business!
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