Amazon wants to steal big banks’ lunch. The e-commerce giant is in talks to partner with Wall Street firms such as JPMorgan Chase to create a checking-account-like product to offer to Amazon customers, the Wall Street Journal reported.
The product would target younger consumers and the un-banked, though the initiative is still in the early stages and may not take off. It is unclear whether the product will see customers write checks, pay bills or access an ATM.
Big Tech Edges Into Banking
While Amazon intends to partner with banks, Wall Street has long wondered when the tech giants will encroach on their territory.
Europe’s roll-out of “open banking” rules, which force banks to provide access to willing customers, has led some senior bank executives to say that Big Tech could cherry-pick the best bits of their business.
A checking-account product would in theory help Amazon cut the costs its pays to banks and grant Amazon access to valuable data on its customers’ income and shopping habits, analysts said.
Converting online shoppers into financial account holders would also help Amazon to scale its efforts in payments, with its own system Amazon Pay. Amazon is already expected to roll out the system to its Whole Foods stores, which it bought for about $13.5 billion last year.
The potential move pushes Amazon further into the lives of its customers, from Amazon.com to the Whole Foods shopping business to tablets, smartphones and its AI personal assistant Alexa.
The company has made recent headlines with a plan to take on UPS and FedEx, with the announcement alone sending shares in the delivery companies spiralling downwards.
Amazon Is A Formidable Bank Competitor
With millions of customers, their data and access to cheap capital, Amazon would be a worthy competitor to a big bank. Its $700 billion market cap already eclipses the combined value of JPMorgan and Bank of America, the two biggest US lenders.
However, post-crisis regulation will be a hurdle for Amazon. Launching a banking arm would subject Amazon to capital rules that could curb its aggressive etail expansion.
Its mooted banking plan would also face fearsome opposition. Walmart a decade ago tried to obtain a banking license but after heavy criticism from banks and politicians it was forced to abandon the attempt.
For a bank partnering with Amazon may prove alluring. Banks have long tried to target millennials, whose financial habits are fast-changing. A recent survey of 1,000 Amazon customers found that 38% would trust the company to handle their finances as they would a traditional bank.
JPMorganBanking is the likely contender as it already has close ties to Amazon. The bank has issued Amazon-branded credit cards and its boss Jamie Dimon has teamed up with Amazon chief Jeff Bezos and billionaire Warren Buffett to tackle America’s healthcare crisis.
Capital One is also potential Amazon banking partner. Capital One is already one of the largest bank users of Amazon’s cloud-computing business, AWS.
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