Large ecommerce players like Amazon have upended many industries from retail to entertainment to grocers, forcing businesses in these sectors to adapt or face a future filled with uncertainty.

Now the ecommerce giant is poised to disrupt the banking industry.

Amazon sent shock waves through the financial world last week when news outlets reported that the behemoth is in talks with big banks such as JPMorgan Chase to build its own checking account product, specifically targeting younger users and those without a bank.

News that Amazon is also looking to roll out a credit card for small businesses followed, and the company launched its first debit card offering last week in Mexico.

“Amazon is in the business of selling merchandise. Everything they do feeds into that model,” said Thad Peterson, senior analyst at the Boston-based Aite Group, adding that he does not think Amazon wants to become a full-on bank. “By offering [a checking account product] to the underbanked and unbanked, they are opening a sales channel to a reasonably sized population that would otherwise not purchase stuff online.”

Peterson thinks Amazon will roll out some type of checkless deposit account that comes with a debit card so people can make online purchases, although the card or the currency could be virtual.

Maureen Burns, a partner and leader of the financial services practice group at Boston-based Bain & Co., thinks the move will be multi-faceted, an effort that targets new customers, while also continuing to build brand loyalty.

“It could be for customers without credit, or to create tighter relationships with existing customers,” she told Banker & Tradesman. “Amazon wants to increase the scope in which they interact with existing customers.”

Underbanked vs. Millennials

The less-banked and younger customer populations have two entirely different values to financial institutions.

Seven percent (9 million) of U.S. households in 2015 were unbanked, meaning no one in the household had a checking or savings account, according to the FDIC.

An additional almost 20 percent (24.5 million) of U.S. households were underbanked, meaning that the household had an account at an insured institution but also obtained financial services and products outside of the banking system.

While financial institutions do offer products for these populations and stress financial literacy, the numbers – which have improved only marginally since 2011 – show that the underbanked and unbanked are not core to a bank’s business model.

“The truth of the matter is if the banks really wanted to serve the unbanked and underbanked, they would offer a product to serve them,” Peterson said. “Banks can’t take this as a significant threat. Even if this thing is enormously successful, it’s still a little tiny percentage of checking customers in the U.S.”

Millennials and younger customers, on the other hand, are highly sought by banks, but still a bit of a mystery to crack.

To be certain, Millennials are using digital banking services.

Nearly two-thirds of all smartphone users in the U.S. have at least one financial app, according to a survey by Bankrate. Seventy percent of survey respondents said they checked their bank’s mobile app at least once a week, while 16 percent of respondents said they checked it daily.

Amazon, Well Positioned

But that doesn’t necessarily mean these customers are safe, particularly the younger ones.

More than two-thirds of participants in a recent study conducted by D3 Banking Technology and Harris Poll said they were frustrated with their digital banking experience and are prepared to walk away from their current financial institution if a better digital experience presents itself.

The survey also found that digital banking users ages 18 to 34 are more likely than those ages 55 and older to be frustrated with their digital banking experience. Seventy-three percent of the younger group indicated that they have been frustrated with their digital banking experience over the past year, compared to only 61 percent of adults ages 55 and over.

“When customers buy another banking product, 40 percent are buying from another competitor; they are typically not shopping, but will get an offer,” said Burns. “Primary banks aren’t that great at targeting their customers.”

Amazon, however, has done a superb job of creating brand loyalty, attracting customers to the conglomerate for everything from movies to music to food, not to mention the massive assortment of products shoppers purchase every day.

U.S. and United Kingdom consumers ranked PayPal and Amazon nearly as high as banks for trust with their money, according to a recent study from Bain & Co.

In another Bain study, 74 percent of respondents ages 18 to 24 and 68 percent of respondents ages 25 to 34 said they expect to buy a financial product from a technology firm within the next five years.

Bain’s most recent analysis, which came on the heels of news regarding the Amazon checking account, estimates a banking service from Amazon could swell to more than 70 million U.S. customer accounts within five years.

That would equal the size of Wells Fargo, the country’s third largest bank.

“I do think banks need to be worried,” said Burns, adding that she thinks there has been too much reliance on the branch. “Frankly, they have struggled to create those really good digital experiences.”