The idea of an "Amazon bank" may be evolving into reality. Rumors have been floating for a while that Amazon may dip its toes into the banking world.
New reports surfaced even more recently. And, financial experts on national news networks and newspapers chimed in with their analyses.
And, Why Not Amazon Banking?
Amazon transacts E-commerce at the highest levels. They dominate internet retail with millions of financial transactions. Furthermore, the company has shown that it's unafraid to expand into physical spaces and new industries. This is evident from their foray into Amazon Books, Whole Foods and Amazon Go.
Believe it or not, Amazon’s entry into financial services is not a stretch of the imagination. Amazon already utilizes financial technologies, offering a variety of loosely financial products via:
An Amazon store that uses shopping technology created by Amazon to process the financial exchange. Shoppers use the Amazon Go app to enter the store, pick-up products and leave. There are no lines and no check-out — just an electronic statement.
Shoppers can get a special Amazon Cash barcode from the Amazon website or app store and load it at any participating physical retailer. And, Amazon customers can add between $15 and $500 to their Amazon Balance in a single transaction.
Amazon Pay is an online payment processing service. It lets shoppers make payments using any of the payment methods associated with their Amazon account to pay for goods or services on third-party websites. There is speculation that Amazon Pay could soon be used in physical stores.
This is Amazon’s rewards program for Prime subscribers. Prime members can receive 2 percent back on purchases when reloading an Amazon Gift Card balance with a debit card attached to a bank account.
AMAZON LENDING SERVICES
A service for Amazon to offer loans to its online sellers, which allows Amazon to make extra money on merchants who are unable to secure loans from traditional sources.
Yes, Amazon already lends to small businesses, and Amazon Lending Services has lent billions to select merchants for years. Amazon Lending Service is an exclusive service where invited sellers receive loans up to hundreds of thousands of dollars. Also, if the seller repays the previous loan on time, Amazon may offer additional financing with even higher amounts. The Amazon lending program appears successful and mutually beneficial, giving merchants access to capital in order to elevate their businesses, and, in turn, generate more revenue — for Amazon.
Banking on Experience
Clearly, Amazon has financial experience. And, due to its large customer base and market value, an ‘Amazon Bank’ would be one of the largest banks in America. However, entering the banking industry on its own might not be the best move for the company. Should it do so, Amazon would need to carefully navigate the numerous rules and regulations of the financial industry.
Also, the company would have to gain certain banking licenses as well as develop complicated financial products on its own. Finally, an Amazon solo venture into banking could disrupt the financial sector. This could add further scrutiny to the mega-brand, as it continues to ostensibly take over every industry it touches.
Therefore, the above considerations give credence to reports by the Wall Street Journal that Amazon would instead partner with an existing bank such as JP Morgan to offer a financial product like an Amazon-branded checking account. Such a partnership would ease Amazon's entry into the financial world. However, it's still too early to know the route Amazon will take. According to The Wall Street Journal:
“Amazon is in talks with several banks about building a checking-account-like product for its customers. The talks are focused on creating a product that would appeal to younger customers and those without bank accounts but does not entail Amazon becoming a bank itself. The online retailer put out a request for proposals from several banks last fall and is weighing pitches from firms, including JP Morgan and Capital One. Discussions over the product are still in the early stages and may not come to fruition.”
How does ‘Amazon Bank’ benefit Amazon?
Many Amazon customers loyally use debit cards and third-party credit cards on its site. Should Amazon convince even a fraction of these customers to make purchases through an ‘Amazon Bank’ checking account, Amazon would save millions of dollars it currently pays to credit card companies and other banks in processing fees.
It’s obvious: Amazon wants to expand its brand. Amazon now has everything from web services to grocery stores. Amazon is known for using convenient tools to entice and lock users into their ecosystem. An Amazon Bank would be another way to bring in shoppers to buy and stay on amazon.com.
Are there benefits for Amazon consumers and sellers?
Many banking customers, especially millennials, complain about high banking fees. Amazon as a trusted worldwide brand — especially by millennials — could position itself to be a more economical and convenient alternative to traditional banking. Millennials facing high banking fees, as well as customers without banking accounts, could be more prone to open an Amazon-branded banking account than a traditional one.
Although Amazon has sufficient cybersecurity and deals with credit card information constantly, older consumers are less likely to provide their credit card information online. These consumers may more likely shop Amazon via an Amazon checking account instead. More customers and streamlined financial transactions would be beneficial to Amazon, and therefore Amazon Sellers worldwide.
Is this really next for Amazon?
The verdict is still out on whether Amazon will venture into financial services. However, since Amazon is primed (pun intended) to take over the world, don’t be surprised if Amazon-brand checking accounts arrive sooner rather than later.
Could Amazon ATMs stationed at Whole Foods or Amazon Books be next? Only Amazon knows, but if you stay tuned to the Directional Cue blog, you’ll be one of the first to find out!