How Amazon’s Acquisition of Whole Foods Serves as a Roadmap for Bank & Credit Union Success

by Nik Wahlberg | August 31 2017

As big banks continue to erode share-of-wallet for community banks and credit unions, the time is now to act to survive and thrive in a time when competition is high and the concept of “local” banks is becoming blurred by digital banking capabilities. Now that the dust has settled on Amazon purchase of Whole Foods, it is time for community banks to take notice and position themselves similarly. Why, you ask? There are several parallels between this acquisition and how community banks and credit unions should start investing to position themselves, and it has nothing to do with groceries or online shopping!

For a mere $13.7B investment, Amazon purchased the Whole Foods brand and their 466 storefronts. It is reported that the brick-and-mortar locations will remain open. Amazon will get access to their product and the ability to tout local convenience while using their robust sales and distribution network to expand the Whole Foods brand beyond their traditional physical locations. With a full 24% of millennials having entered a Whole Foods at least once in 2016, the target is clear[i]. This also serves as an entry point for a large shopping category where Amazon has only experienced limited success thus far.

“Great, I’ll be able to order groceries from Amazon, I’m a banker, how does that affect me at work?” you may ask. It is your roadmap for how to stop big banks from eroding your customer share: personal, local experience in the branch paired with the ability to easily transact with you digitally when they would rather do business with you from their location instead of yours.

There is no doubt that the big banks have a leg up here. June’s American Digital Banker conference was filled with big bank after big bank talking about where they are investing their time and money. Speakers from TD Bank, Bank of America, Wells Fargo, J.P. Morgan Chase and more all talked their multi-million dollar investments in digital, artificial intelligence and how to capture millennials.

Despite many who want it to be true, digital is NOT going to replace all physical branches for the foreseeable future. While many of the big banks would like this to be true, Amazon’s investment in Whole Foods highlights the fallacy with that line of thought. Community bank and credit union survival lies in successfully merging the online and offline experiences. You must give your customers the ability to interact with you in your branch, or digitally, however THEY want to do business with you. [ii]

Plus, while digital is everywhere, it is NOT where all sales take place. While people regularly use their cell phones to search for stores and products online, most of those digital searches still translate to an in-person transactions. In fact, a comScore study last year showed that 78% of local mobile searches result in a direct transaction within one day. Of those, 73% happened in a physical location and only 11% resulted in that transaction taking place online.[iii] While brand specific queries dominate mobile search, according to that study, there were a large number of searches that did not include a specific brand, just an expression of need. You should fill that need.

Amazon’s Whole Foods acquisition highlights your opportunity to gain and/or retain share-of-wallet within your retail footprint and beyond. But right now, the big banks are taking YOUR customers away at an alarming rate. Through consolidation and cost of keeping up with regulation. There is no doubt that the spike in spending on regulatory costs plays a large role in the shrinking number of community banks. Put simply: size matters. Reflecting on 2014 expenditures, banks with $1 to $10 billion spent 2.9% of non-interest expenses covering compliance costs, while small banks, around $100 million in assets, spent 8.7% of their non-interest expenses on compliance[iv]. The reduction in ability to generate revenue from fees, paired with the rise in costs for IT security, staffing, risk assessment, documentation and regulatory reporting, four banks a week close their doors as they lose that fight against the big banks[v]. These changes make competing against the bigger banks harder and harder to do.

In June, CUNA President Jim Nussle delivered some staggering numbers about the shift from small banks and credit unions to the top 100 banks. He shared that in 1992, about 41% of assets were managed by the top 100 financial institutions, with 53% managed by community banks and 5.6% with credit unions. Fast forward to 2016 where the top 100 FIs manage 75% of all assets, community banks hold 17% and credit unions hold mostly steady at 6.8%[vi].  His message for his core is ok, but the implications for community banks is dire. “The good news is that (we have) about 110 million members with $1 trillion in assets, but we’re not moving and we’re not growing,” Nussle said. “But the point I look at when I see this chart is what’s happening with the rest of the market and why is it happening. You see the smaller, community banks? I would argue the biggest story of this chart is that they are getting their lunch eaten…handed to them. Their options are running out.”

This is where we could say, “Well that doesn’t look promising!” The shrinking share-of-wallet and escalation in the closing of banks are one part regulatory challenge and one part failure to adapt. That second part is the light at the end of the tunnel. There is a “why,” a “how” and a “way” for community banks and credit unions to compete and grow and survive in the new highly regulated world. This is where we will take a page from the Amazon acquisition of Whole Foods and highlight how that recipe can work for your financial institution.

The Why

There is still a need and a place for smaller banks and credit unions for a whole host of reasons. There is a growing desire to do business locally, keep money local and KNOW who you are doing business with. And if you just said, “We’ve been offering that forever!” You are correct, but there’s a twist, keep reading!

First: Millennials like to shop close to home (and keep their money there too…) The “hometown” and “homegrown” extends beyond farmer’s markets. There is a resurgence in the pull back toward small businesses[vii]. Building and establishing relationships matter. Being relatable to your customers and prospects matters. However, a one-size-fits-all approach will not be well received. The free checking account is not enough; they want to identify with product and service offerings at a more personal level[viii].

Second: There is still a reluctance on the part of many to trust big banks. Having survived through the financial crisis of 2008 and their role in that meltdown, those feelings are unlikely to go away any time soon. Last July, Anthony Jabbour, COO of Banking and Payments at FIS explained this line of thought when he wrote, “This is already evident by the fact that less than half of the millennials in America are banking with the top 50 global banks…Instead their money is distributed across regional, community and digital banks and credit unions — though notably, community banks are losing ground with millennials[ix].”

The problem with his message is that while only 37% of younger U.S. millennials bank with the top 50 banks, only 9% of the use community banks, down 3% from 2015. They are also more inclined to use digital banks (13%) which is what makes them the most different from their older millennial peer group.

Jabbour concludes that the time to act is now, “This all returns to the original thought that it's time for banks to adapt or else. The window of time is probably shorter than anyone estimates. Just consider that it has only taken 20 years for smartphones to go from unimaginable technology to mainstream.” And the solution is a combination of local offerings paired with digital convenience.

The How

So, Amazon buys a grocery store where a quarter of millennials have shopped in the past year. This is a digital experience giant taking over a brick-and-mortar and community based chain of stores. The outcome Amazon is banking on is expanded personalized local service and offerings paired with online ordering and digital convenience to expand their overall market share. While we are not advocating you start delivering groceries, we are saying it is time to invest in digital and adapt to your audience. Accenture’s 2015 North America Consumer Digital Banking Survey highlights why this will work as they conclude, “Millennials choose their banks for online banking services, reasonable fees, branch convenience and loyalty rewards programs. Banks can capture Millennial mindshare by delivering a seamless omni-channel experience with personalized, proactive interactions.[x]” That is something big banks can try to be, but where you should have an advantage.

Your audience wants it all, and they want it now. Explained well by American Banker’s aptly titled article: article “What Do Millennials Want from Banks? Everything. Nothing. Whatever.” They explain their research analysis and findings that Millennials strongly desire a personal touch with their banking, BUT will judge you as a FI based on your digital capabilities[xi]. It is time to adopt a technology and mobile first approach paired with personalized products and services. While some would argue, it takes investing in Artificial Intelligence to make this happen, we contend there is an alternative for you. With a strong strategy during website design, implementation, integration and content, you can use your budget to accomplish most the goals instead of spending it all on deciding what you should do and who you should talk to.

The Way

It’s time to make the investment in terms of time and technology to create a customer experience that will keep customers from leaving for convenience elsewhere, and provide you the opportunity to gain new customers through the combination of localized services and digital convenience. If your website is not done with a mobile first approach, or has not been redesigned in the last couple of years, you’re falling behind. To be digital first, means you are not going to lose out to competitors who have better online tools in their arsenal. This requires a few things:

Design and implementation: Your website is your online branch. Your virtual home. It should represent you in that way and it will serve as the hub for all your marketing activities forevermore. Treat it as your branch that needs an upgrade. With design and implementation, your website will not only look great, but will function well on any device, without limitation. If your customer wants to access online banking on their couch on their iPadÒ, that will work. If they want to deposit a check from their mobile phone, done. If a prospect is surfing the web looking for a way to invest some cash in the short term, let them find YOUR rate special.

Integrations: While your user experience and user interface are step one in this process, your tools will all be integrated into your digital hub. Online banking, online account opening, CD and mortgage rate tables and displays, online loan applications, links to your social profiles, mobile banking and more. We do not advocate you go out and build your own online banking portal. We do know that integrating that experience well in your website will help create the seamless branch-to-digital experience your clients and prospects are craving.

Strategy: This is where we argue that strategic planning during and beyond the design and implementation phase can help you achieve the goals for your FI. We can help you put the right content in the right place for the right audience, help you be more discoverable online and attract more customers to your online branch. We have driven these results for banks and credit unions, even when there was no budget to spend on AI. Through creating content funnels for your core products and services, then drilling deeper and creating audience-specific content within those funnels can help you achieve a large percentage of what spending big money on big data will tell you to do.  Plus, this dovetails well with that American Banker article said about Millennials, which is they are looking for their local banks to serve as an advisor.

Use that advisory to find intersections between branch and digital. Much like Whole Foods stores will start offering more personalized services and cooking classes, your bank should consider similar options. Offer a workshop on how to start saving for [INSERT BIG LIFE EVENT HERE]. Invite the community. First time homebuyers, short and long term investments, strategies for paying off debt, investing in real estate. This list is endless. You can offer those locally and transform the content from those face-to-face events into articles and pages for your website.

These strategies strengthen your relevance, at into an article for your website and you are on the right path. And, the best piece of strategy advice: stop worrying about your “Millennial” strategy. You’re behind and it doesn’t matter. It’s really a “Consumer” strategy in terms of offering your products and services to people where, when and how they want them. A full 95% of American adults have cellphones, 77% of them are web enabled[xii], and that number will only continue to rise as those graduating into the “adult” category do not know what life is without a smartphone. Stop focusing on “Millennials” as a category and start acting on being more people-centric. In the end, it’s the same thing.

We know budgets are tight, but we have shown time and time again that investment now in digital will create strong results for you in the near future. We have created client success that include ROI calculations like:

  • Key converting page traffic being up nearly 400% 6 months after launching a redesign and integration project. This is with page views up to 2.3m in a month.
  • Taking a site that produced about $625k/year in mortgage revenue to producing $3.9M/year after the relaunch, and that number continues to grow
  • Produced an additional 939 accounts opened in less than two months after the relaunch and upgraded integrations.


With the right strategy, your site will rank for your target categories. Want to target more customers near your branch? First time home buyers? New CD accounts? Savings accounts? More remote customers? All of that can be accomplished when digital comes first and strategy is baked into the design. Some will argue that they cannot afford to make the investment. The reality is: you can no longer afford not to, and done with the right partner, the site pays for itself quickly.

While the overall numbers are not trending in a favorable direction, there is opportunity for you to capture more. With the reluctance of many to just bank digitally, or to give more of their share-of-wallet to big banks, the time to act is now. Clearly, the opportunity still exists. It’s time for community banks and credit unions to be as digitally friendly as possible with local, homegrown storefront on the corner. Be what your customers and prospects are demanding: digitally friendly, locally relevant.

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