What! Amazon a bank

24/06/2024 20mins
Phani Kumar S


Can anything stop Amazon? The online retail giant is now stepping into the banking sector. Banking regulations or international borders don't seem to be enough to block it from doing so. The banking industry believes Amazon can be a real threat to traditional banking. With tons of money, millions of devoted customers and enough customer data to fill a universe, why not become a banker?

Amazon Loans

There is speculation that Amazon's leap into banking is just the tip of the iceberg. Amazon started a small business loan service in 2011, fueled by data obtained from its e-commerce site. Amazon's loan service offered small businesses underwritten loans for 12 months for loans starting from $1,000 up to $750,000.

These loans are made available only to companies that sell their products on Amazon's retail site. That may limit the impact on banking institutions. In February 2017, Eugene Kim of CNBC published a report that Bank of America was financing Amazon's lending service. There was no public discussion about the partnership.

Amazon Cash

There are about 7% of American households that are without bank accounts. They put their financial trust in prepaid money cards. Seeking to land this market, Amazon launched Amazon Cash in 2016, offering Amazon account holders the opportunity to load their accounts with real cash. The Amazon membership customer can shop at a participating retail store, by using a downloaded barcode, pay for their purchase straight from their Amazon account. As it is not a physical card, there is no fee charged to the customer.

Amazon Checking

This next move by Amazon has the banking industry in a tither. Membership checking accounts (Checking account is a deposit account held by financial institutions that allow withdrawals and deposits) that they feel pose a threat to the tradition that banks have relied on since the last millennium. They fear the loss of young customers who would like to put their money in tech companies.

It seems that Amazon and JPMorgan Chase, along with Capital One, are contemplating creating a product that resembles a checking account. Not to mention treasure chest of customer data that is virtually up for grabs.

More For Small Businesses

Amazon already has credit card services for its current customers. Moreover, it has teamed up with Chase and Synchrony Financial to make it work.

Amazon has more in the works for U. S. small businesses, a credit card that is being collaborated on with JPMorgan Chase and American Express. It is still in the development stage but knowing Amazon's ambitious nature; it is likely to happen in the immediate future.

Now that you know what Amazon is planning for its financial future, its customers' financial future and its vendors’ financial future, let's look at Amazon's economic history.

When It All Started

1999: Granted its first financial patent for 1-click shopping that was developed a couple of years before.

2006: Interest-Free Financing was brought on board to make purchasing large electronics easier for customers.

2009: The Japanese shopper got a present from Amazon for 2009 Christmas-season. Through MasterCard, Amazon offered credit card rewards that paid off in the form of Amazon gift vouchers for the Japanese yuletide shopper.

Jeff Bezos, Amazon's CEO, is certainly not lacking in vision, his bold move into the financial world is not going unnoticed. Some bank execs are worried about the impact of Amazon's move into finance, which they fear could have a lasting effect on the financial industry. For now, it appears that this financial move into banking will be limited to Amazon's customers and vendors. Though it would be early to take a call on that.


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