Amazon is getting involved in a lot of different services areas. From a diversification perspective, this is good news. But I wonder if they’re moving too far away from their core service? Now, I am not trying to say that Jeff Bezos doesn’t know what he’s doing. I am sure he’s got things handled, but his latest venture does have me questioning a few things. Amazon is reportedly looking at getting into the retail banking space. According to the Wall Street Journal, they are contemplating a new checking account that would cater to young people and people who don’t currently have a bank account.
Like I said, I am not here questioning Amazon’s motives on this one, but on the outset, this doesn’t look like a good idea. On one hand, I am what they call, a bleeding heart. Which means, I think that anyone who is considered “unbanked” should have the opportunity to get some kind of bank account, without the fear of their past being brought up. But on the other hand, sometimes the “unbanked”, including young people, are kind of risky.
That said, there is a lot of money to be made in the financial industry, so maybe this isn’t such a stretch. What makes Amazon’s position so strong is that it’s got the technical know-how and the start-up capital to make a success from its effort here. A lot of companies end up spending their first years struggling because they can’t stay afloat. But that’s the key takeaway here. When technology and finance industries come together, everyone benefits.
Banking is incredibly complicated, but it’s also highly regulated. Over the last couple of years, many of the hurdles to getting into the industry have been lifted, giving new startups the ability to launch their own products. And some of these products are kind of incredible. These so-called “challenger banks” are doing the same thing banks have done over time. They keep money safe and let you make purchases and withdrawals. Many offer credit to deserving customers as a revenue stream. What’s special is how they do this. They use technology to make banking as frictionless as possible. Through apps on their phones, customers can immediately know what’s happening with their money and are able to make decisions autonomously.
Enter Amazon. If Amazon is able to get into the industry, it could be revolutionary. Amazon is one of the biggest companies in the world – so there’s no shortage of cash for them at this point. Which is usually one hurdle. They can also draw on Amazon Web Services in order to deal with infrastructure. Further, they already have Amazon Pay so looking at the payment side of things is kind of already taken care of. And if they do need anything else – they simply just have to buy the product or company to make it work. Like I said, they have a ton of cash.
The Wall Street Journal suggests that Amazon plans to partner with an established bank. If that’s the case, then this could be an even easier task for them. Amazon leaning towards the “unbanked” as I suggested earlier, doesn’t necessarily mean that is who can only use the products and services. I’m sure they won’t leave it there. The interesting thing to think about is the fact that Amazon took traditional online retail and turned it on its head in a very positive way. Can they also do that with the banking industry?