Amazon to Offer Banking Services?

Jackson Lewis, Associate Editor


SEATTLE -- Amazon is in talks with a number of large banks, including JPMorgan Chase & Co. and Capital One Financial Corp., to build a tool similar to a checking account for Amazon customers, according to The Wall Street Journal.

Details are still unclear, but those familiar with the project told the Journal that Amazon does not intend to become a bank. Instead, Amazon is looking to partner with existing banks so the e-retailer can offer younger or unbanked customers another way to make purchases both online and in Amazon brick-and-mortar locations, such as Amazon Go, the company's smart convenience store.

Amazon did not respond to inquiries from CSP Daily News on the matter.

One of the strongest criticisms of Amazon Go has been that it effectively shuts out consumers without a bank account, as users of the Amazon Go app must assign a debit or credit card from their Amazon account to check in to and make purchases from the store. Additionally, while Amazon has retail partners—including some c-stores—that allow customers to make payments into their Amazon account using cash, this extra step still adds another layer of difficulty for the unbanked shopper who wants to purchase items from Amazon. What if there was a tool the e-retailer could give these customers to make their experience easier?

Click through for more information about Amazon’s exploration into banking and what this development might mean for c-stores …

Pay with Amazon

amazon pay

There are no concrete details concerning Amazon’s banking project, but the biggest question for c-stores is what Amazon could offer retailers to convince them to accept payment associated with an Amazon-based banking system.

For a possible preview, c-stores can look to Amazon’s existing mobile payment tool, Amazon Pay. The tool gives online merchants access to the streamlined Amazon checkout experience and integrates with any retailer’s customer relationship management system in order to interact with a retailer’s existing loyalty program.

Domestic transactions in the United States made through Amazon Pay charge merchants a 2.9% processing fee along with a flat 30-cent authorization fee. Any transaction that crosses into international territory is charged a 3.9% processing fee.

What do consumers say?

Online student marketplace LendEDU recently asked 1,000 Amazon customers if they would trust Amazon as they would trust a bank to handle their finances, and 38% responded positively.

Meanwhile Bain & Co., a management consulting firm, surveyed more than 133,000 consumers across 22 countries, asking them if they would be comfortable buying financial services from large technology companies. PayPal was the most trusted tech company when it comes to finances, according to the survey. Amazon came in second, followed by Apple. The survey found more than half of U.S. respondents—and three quarters of those ages 18 to 24—would purchase financial services from a tech company.

Whatever metrics are used, it is clear that consumers, especially younger consumers, are open to the idea of using banking services through a tech company such as Amazon.

“Amazon stands a very good chance of succeeding in banking, by disrupting the industry as it has in retailing,” said Gerard du Toit, who leads Bain & Co.’s banking and payments sector in the Americas. “Customers indicate ample willingness to buy financial products from technology firms, and Amazon has earned their trust more than most other tech firms. It also possesses all the essential ingredients: digital prowess, a large customer base, an organization skilled at delivering pleasant customer experiences, and ample leeway to extend the brand into banking.”

Monopoly monster

Adding an easily accessible Amazon checking account service would undoubtedly help unbanked consumers participate in the online economy, and banking represents yet another industry where Amazon is dipping its toes.

  • Amazon Web Services, a web-hosting service, is the massive e-retailer’s main source of income, with clients ranging from Kellogg’s to Dow Jones.
  • Meanwhile, the company is also building its own delivery service.
  • It has an entertainment arm generating content both online and on the big screen.
  • Amazon is partnering with JPMorgan and Berkshire Hathaway to explore launching a healthcare service for employees.
  • And now, Amazon is exploring banking, too.

It's a lot for one company. However, the main reason the idea of an Amazon banking service is disquieting is not the number of industries it is involved in, but the immense market power Amazon wields. The e-retailer has a market value of more than $700 billion, far greater than the value of JPMorgan and Bank of America combined. If those banks are too big to fail, what would that make Amazon?