Amazon may Team up with Banks to Provide Amazon Checking Accounts to their Customers
Amazon is the dominant force in online retail in the world. It offers several commodities to their customers such as books, groceries, TV accessories and many more. This company is focused to increase customer satisfaction in a motive to catch more traffic and retain their loyal customers.
Amazon has made several steps to ensure a cost effective and a faster way of making purchases for their customers. The first steps began with lending. Amazon CEO said that he was teaming up with banks that could help his company expand its lending program for small businesses that sell on Amazon’s website. Amazon lending was launched in 2011. According to people who are familiar with this move, the company teamed with Bank of America to reduce the risk associated with lending. Although the leaders from both Amazon and the Bank of America declined to comment, this was the first move in Amazon’s decision to digitize its paying and lending mode.
Amazon has already gone after the lost customers by attracting them with Amazon cash. This is a mechanism for them to load their amazon accounts with money and eventually use it to pay for the products purchased. Amazon also launched credit cards to their prime customers. They are looking to ring up more sales through this credit cards that are given to its most loyal customer base.
The Amazon next big thing is the provision of checking accounts to their customers. The online shopping giant-Amazon may team up with banks to provide checking accounts to its customers soon. The company is in the process of negotiating with world’s largest banks such as JP Morgan Chase or Capital one to ensure this idea is a success. The banking sector is highly regulated and hence Amazon has to find a friendly partner to work with. The idea is likely going to be a success given the company’s recent successful programs.
According to wall Street Journal, the talks are still in their early stages and hence there is little to offer to the public at this moment. The potential for this e-commerce giant to enter in the banking seems as a threat to many banks. The company has an enormous customer base and hence you can imagine the number of people they will cut from the banks. This means that the company will let its customers purchase and pay for the services and products without necessarily approaching a bank account. All this process will be facilitated by the Amazon-Branded Checking account.
How Amazon Checking can Changing Banking of the Future
The company is able to leverage customer insight for personalization. What this means is that most if not all customers will be convinced enough to accept the coming changes in the company. This is a very critical thing that banks should be worried about.
Amazon could also be the next Open Banking power play. The company is focused to ensure this project is a success and this could mean an additional player in the financial market. This will increase competition and eventually make the financial sector more active.
Amazon is known to putting its fingers in a lot of pie. They are not just in online retail. They have ventured into web services, payment processing, logistics and many more. This clears the doubt that the Company will get into the banking sector. They have been on the move to simplify the process of processing payments for their products and services and at the same time venturing on to other businesses.
The company is also renowned for its expenses and the huge profits. This shows that the company will definitely be able to implement the idea without facing any financial constraints. They have ventured into several other businesses in which they incurred huge expenses to implement and they made it.
The company wants to construct a seamless relationship with its millions of customers. The customers have a mechanism of paying for everything they purchase on Amazon directly using the Amazon Branded Checking account. The e-Commerce giant is extending its tentacles into just every aspect of its customers.
The company may also be having an eye in the profits made from the banking sectors. The banking sector makes an aggregate profit of $920 billion every year. This may also be the reason why Amazon is looking into venturing in the same field. Amazon is known for taking opportunities as they come in the market and therefore getting into banking is not a surprising idea.
Transaction fees can also be overwhelming. This can probably be another reason why Amazon is considering offering checking accounts to their customers. If this comes to reality, neither the company nor the customers will be required to pay the transaction fees. This is a very effective idea of reducing the costs associated with transacting via the bank accounts. This idea may be a little bit difficult to implement in partnership of other banks since it presents a great loss to the banking business.
Amazon Checking is Seen as a Way to Cut the Base for Middle-men
The company also turned its gaze towards the shipping industry just with the intentions to reduce the impact of middlemen. This means that the company is making impactfull steps in the recent past that can greatly change the way customers do things in Amazon.
According to a report given by The Wall Street Journal, Amazon is on the way to negotiate a friendly partnership with Capital One and JP. Morgan. Although the banking companies did not clear the doubts, there are convincing reasons that Amazon will come in an Agreement with one of the two.
However, several investors and economic analysts argue that this move will not affect the bank’s businesses. Bank of America Merrill Lynch predicted in a note that this move by Amazon will likely be a small boon to e-Commerce sales and would unlikely affect the way banks do business. In addition, he also admitted that there will be an impact although not much to the banking sector.
The whole idea is targeting an approximate number of 15.6 million Americans who are in the low income category. They are not banked. This means no checking accounts, no savings account, or credit cards of any kind. Therefore, this population has no mechanism to pay for the products in Amazon. It will as well target the young people who are their loyal customers but are yet to get a bank account.
The unbanked American population is discriminated and hence it makes sense for Amazon to launch a program directly aimed at reaching this population. This will be a very effective way of tapping that lost customer due to shopping limitations.
It is also a mechanism to make customers more Loyal to the Company. Customers having a simple mechanism for paying for the purchases will make them more loyal to the company. The reduced fee of transaction will also help keep them in the company. Most of the company’s loyal customers are the young or those who have low income. Its traditional well-heeled Prime members are not as active.
As the company diversifies its products, a convenient way to pay for them can be very attractive to the customers. Alongside with other incentives such as discounted prime membership, the company should implement several other mechanisms to tap their lost customers. The company is also in the way of testing a Pilot program with USDA to offer SNAP benefits to online shoppers.
If this move comes to reality, then Amazon will have a very good way of convincing the young and the low income to shop. Walmart has a very good such strategy of enticing customers. Amazon is also implementing such a strategy but in a big way. Customers could reportedly hold money in the accounts and take deposits.
Amazon is not focused to compete with the existing banks in the market. They are aimed at increasing engagement in their marketplace. The Bank of America analyst Justin Post said that Amazon aim at expanding its financial offering and not to disrupt the financial sector. The main aim is to increase engagement on its market place.
In conclusion, what makes amazon in a better place to implement this idea is that the company is well versed and has the know-how and resources to see it a success. It’s not one of those companies that spend their years struggling to stay afloat.
The company has carefully observed the technological growth in the banking sector and hence have no doubt the adoption of this technology will improve user experience in their online retail. The customers will be empowered to control their finances and do all the transactions without additional transaction fees.
The banking sector is a much regulated sector and also complicated. Over the last years, the governments have relaxed the regulations and they have left a place for other startups to launch their own offering. Amazon is one of those players that wants to adopt the banking technologies to offer quality services to their customers.
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