Bank of Amazon?

Written by Mark Evans

Consultancy Bain and Co believes that the long predicted entry by Amazon into the banking sector might have taken a step closer. The company already has a cobranded credit card offered by Chase, and Amazon Cash allows customers to deposit cash directly to their Amazon accounts from more than 10,000 retail locations throughout the US, but now Amazon is now talking with big banks, including JPMorgan Chase & Co.

Whilst retail banking is notorious for its low margins, the ability of Amazon to create user –friendly and integrated services makes it possible for the company to ‘join the dots’ and produce a range of products that will attract users, and long-term make it easy for them to stay with Amazon.

In the Amazon version of banking, a virtual bank with no physical presence and access via Alexa means that set up costs will be low too.

Bain and Co reckon it is likely to partner an existing bank rather than go it alone (it is already a partner with JP Morgan and Berkshire Hathaway on health care). Such an arrangement might allow Amazon to avoid dealing with bank regulatory compliance and managing the balance sheet, let the bank take a profit yet still gain financial benefit in having direct fee-free access to customers’ checking accounts.

Bain & Company estimates that Amazon could avoid more than a quarter of a billion dollars in annual interchange fees in the US alone, and once established it expects the company to move into other financial products, and given Amazon’s data stack it has the ability to personalise offers and communications – as well as having insight into customers’ life events, from getting married to having children to buying a house, which will allow the company to offer relevant financial services products.

Full Bain and Co feature here.