In the USA, the grapevine has been swirling that the world’s largest online retailer and one of the most trusted e-commerce brands Amazon may soon foray into retail banking. It would be difficult to ascertain whether Amazon Bank becomes a reality or it merely ends up between the ambitious planning & stumbling blocks of financial regulations. But one thing is for sure that if Amazon Bank happens the traditional banking industry may be the next industry to endure the ‘Amazon Effect’.
Diversity of Amazon
I think of Amazon and I start to get a feeling that probably there’s nothing these guys can’t do. Starting from just selling books, today the business spaces where Amazon operates are too wide to be believable. Though most widely known for e-commerce today, Amazon offers cloud web storage, cloud computing, hosting, music and video streaming services, online shoe retailing, discount coupons, book reviews, content publication…. and the list is even bigger. Now they are even competing with old-fashioned brick-and-mortar retailing in many places.
This leaves me wondering if Amazon’s business appetite & diversity of interest is so wide, is there anything these guys can’t do? And if so then the rumors of Amazon coming into retail banking sounds less of a rumor and more of a strategic business expansion plan which may lead to Amazon Bank happening very well in near future.
Amazon currently operates in 15 countries, covering all the big economies in the world. In India, Amazon started in early 2012 by launching one of its subsidiaries Junglee.com. When they started Junglee.com was just a price comparison platform and not the real e-comm.
It was only in 2013 that Amazon India started full-fledged e-commerce and since then it never looked back.
Amazon Business Diversity Timelines
Here is how Amazon has diversified into various products & businesses by way of organic growth and inorganic acquisitions too.
Is Amazon already into financial services space?
If it’s an objective question, then the answer would be yes. Amazon Bank may not be true today but in a way, it offers financial products. Before you start analyzing what financial services Amazon offers currently, let me explain it that Amazon’s financial offerings are limited only to the US as of now. But the US is the first & parent market for Amazon, if Amazon Bank happens, which so far looks happening, they may very well be keen to replicate the same in other countries. Amazon bank may become a global name. If that happens, then it would be an easy guess that probably India may be among the first few destinations for Amazon Bank.
The most popular financial services being offered by Amazon in USA / India are :
Credit Cards: Amazon offers credit cards to its customers in US and these credit cards can not only be used for shopping at Amazon but they are fully functional credit cards which can be used elsewhere as well. Of course, while you use Amazon Credit Card to shop at Amazon, you get more rewards, cash back, benefits and discounts. Amazon Store Card, Amazon Discover It, Amazon Corporate, Amazon Business cards etc are some of the product lines in this segment. This is happening even when Amazon Bank is not a reality.
Rechargeable Gift cum Quasi Debit Card: Though not very popular but Amazon has been offering a Quasi (Quasi-means which may apparently look like but actually not it is) Debit Card in US markets for quite some time. You can buy these gift cards or quasi-debit cards online by sharing your info while subscribing. These cards can be used at Amazon and also similar to a normal Debit Card for money withdrawals. The only catch here is that these quasi-debit cards are actually prepaid cards and they not linked to bank accounts. So once the balance of the card is consumed you will have to reload it with more money for being used it again. Amazon offers this even without being Amazon bank.
Quasi Deposits: Maybe not in the US but in India, Amazon already collects Cash on Delivery (COD) payments and while the delivery boy comes you can deposit money with amazon thru them as well. You may make more payment that the COD purchase that you made and the extra payment made by you is loaded in your Amazon Pay wallet thru the cashload feature being offered by Amazon in India. To make it more exciting & rewarding for you, Amazon even offers handsome cashback when you make additional deposits in Amazon Pay. The Amazon has been offering it in India since late 2017. Amazon Bank may just take it from here and make it into a large business space for them.
Amazon Pay: The Amazon pay is an online wallet using which you can pay for bills, make online transactions, buy gift cards, shop at Amazon and much more. It is operational in India too and some of you might have experienced it as well. The Amazon pay competes with other payment wallets such as PayTM, Freecharge etc. Amazon has not really focused on building this so far and hence Amazon Pay till now is not very popular. Even though Amazon Bank is not a reality now, in a way Amazon offers mobile wallet kind of payment banking services currently.
Business Loans: In the USA, Amazon offers small and medium-size business loans to the sellers empaneled on Amazon. The advantage that Amazon carries here is that Amazon knows the transaction capability of these sellers more than any other financier or bank would. That’s why they are in a better position to assess the creditworthiness of these sellers. The small time business owners find it convenient to get their business loans at Amazon as compared to banks in the US.
Amazon Protect: Very soon Amazon is said to be launching Insurance services in the name of Amazon Protect. It may start in the USA but Amazon has made it clear that Amazon protect is going to be available across the globe in multiple countries. Much of the product info is still not available. Hence I am limiting Amazon protect here only. Insurance being a high revenue product may become a flagship offering for Amazon bank if at all than happens in future.
Is Amazon Bank a possibility?
Going with the fact that Amazon has had a very strong lineage of business diversification, it has small but fundamentally a strong offering in financial services space definitely puts it in the game. I may sound like an Amazon fan but I don’t believe that anything can stop Amazon. No technology, no operations, no banking regulators or geographic borders can come in between if they decide to foray into banking. With highest level of tech & human intelligence in the kitty, patience, huge business appetite, a willingness to take risk even if that means to fail, a huge and loyal customer base across so many countries, a universe of data, and no dearth of money, Amazon to me seems a real threat to the traditional banking industry, if Amazon Banking happens.
Here in India too, Amazon enjoys an unparalleled level of trust that they have earned over the years while serving to their clients across various platforms. The technology and customer services offered by Amazon are a role model to many other businesses here. You talk of an excellent customer service or state of the art online platform, trust me more than 70% of people would name you Amazon as their top of the mind recall.
India and US being such big markets, Amazon Bank is definitely going to offer a huge playground to Amazon for innovating banking and retail financial space. If they innovate, it would definitely lead traditional banking players to re-invent themselves as well. In the end, it’s the customers like you and me who are going to get benefitted.
Amazon’s Business Aspirations
When Jeff Bezos founded Amazon in 1994, he is said to have written down a list of things which he wants to do at Amazon. From that list, he identified one thing to do first that was bookselling. The list of business aspirations of Amazon has been just getting longer and longer with the passage of time.
Back in the USA, the experts of stock markets say that Amazon’s shares have never been traded on the company’s current valuation or annual profits or share dividends etc. Experts add that stock markets in the USA discover Amazon’s share prices on the basis of the company’s future growth potential and business aspirations. That’s one of the strongest reasons why Amazon needs to continuously innovate with new products, technology and move into newer markets. Amazon at this point in time may be under pressure to keep increasing their revenue and financial services is a readymade large business pool they can take a plunge in. India and US financial markets offer a plethora of business opportunity for someone as big as Amazon. The only bottleneck that I see maybe regulatory approvals as financial and banking regulators in both India and US seem to have protected banking industry very closely over decades.
Sooner or later that time would tell but to me, Amazon’s entry into the financial sector looks inevitable.