Amazon.com Inc. is in talks
with big banks including JPMorgan
Chase & Co. about building a checking-account-like product the
online retailer could offer its customers, according to people familiar with
The effort is still in its early
stages and may not come to fruition, the people said. The talks with financial
firms are focused on creating a product that would appeal to younger customers
and those without bank accounts. Whatever its final form, the initiative
wouldn’t involve Amazon becoming a bank, the people said.
If the product emerges, it
inject Amazon into the lives of those who shop on its website and at
Foods grocery stores, read on its Kindles, watch its streaming video and
chat with Alexa,
its digital assistant. Offering a product that is similar to an own-branded
bank account could help reduce fees Amazon pays to financial firms and provide
it with valuable data on customers’ income and spending habits.
The company’s latest push also
answers a question that bank executives have been asking with increasing worry:
When will Amazon show up on their turf?
With millions of customers,
troves of data, access to cheap capital and seemingly unlimited leeway from its
investors to enter new businesses, Amazon is a fearsome competitor. Its
more-than $700 billion market value eclipses the combined value of JPMorgan
and Bank of America Corp ,
the two biggest U.S. banks.
is building a delivery servicethat one day could compete with United Parcel Service Inc. and FedEx Corp. , targeting the
hospital-supplies market and considering a push into prescription drugs. Shares
of companies in those industries have fallen sharply on news of Amazon’s entry.
In banking, however, Amazon
appears to be arriving more as a partner than a disrupter.
Last fall, it put out a request
for proposals from several banks for a hybrid-type checking account and is
weighing pitches from firms including JPMorgan and Capital One FinancialCorp. , some of
the people said. It is too early to say exactly what the product will look
like, including whether it would give customers the ability to write checks,
directly pay bills, or access to a nationwide ATM network.
Amazon’s collaborative approach
supports what bank executives have long said: that new regulations put in place
after the financial crisis, while bad for profitability, are a protective moat
Amazon wants to deliver
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Any move by Amazon to start its
own banking arm would subject it to capital rules and other regulations that
likely would limit its aggressive expansion. And there would likely be stiff
opposition. An effort by Walmart Inc. more
than a decade ago to obtain a type of banking license withered after intense
criticism from a range of companies and lawmakers.
For JPMorgan or Capital One,
winning the assignment would be a chance to keep a potential competitor close
and strengthen ties to a company that is popular among millennials, whose
financial habits are changing quickly. In a recent poll of 1,000 Amazon
customers conducted by LendEDU, an online student-loan marketplace, 38% said
they would trust Amazon to handle their finances equally as they would a
JPMorgan is already close to
Amazon. It has issued Amazon-branded credit cards since 2002, and the two
companies are teaming up along with Berkshire
Hathaway Inc. on an initiative to tackle rising health-care costs
for their employees.
JPMorgan Chief Executive Officer
James Dimon has said he nearly joined Amazon as an executive in the 1990s. He
remains an admirer of the company’s CEO, Jeff Bezos, whom he called a “friend
of the family” at an investor presentation last week.
Capital One, meanwhile, is one of
the largest bank users of Amazon’s cloud-computing business.
Amazon has been considering a
bigger push into finance for years, looking to reduce the fees it pays banks
and payments processors, people familiar with the matter said. Providing Amazon
customers with a checking account from which they could directly withdraw cash
for purchases could help to reduce some of those fees. But there isn’t much
precedent for this type of arrangement. It is much more complicated than, say,
a co-branded credit card.
Converting its shoppers into
financial account holders could also aid Amazon as it ramps up its efforts in
payments, a fragmented segment with no clear winner yet. The company has had
limited success in getting its own system, Amazon Pay, accepted at other online
The company is now trying to
bring Amazon Pay to brick-and-mortar stores, according to people familiar with
those plans. It is likely to begin with Whole Foods, which Amazon bought last
year for roughly $13.5 billion, the people said.
Not yet clear: what Amazon can
offer merchants, which already face a number of payment providers jockeying for
space at the checkout counter. But shoppers who have an everyday banking
relationship with Amazon might be more likely to use Amazon Pay.
Amazon isn’t the first retailer
to make a play in financial services. In the early 1980s, Sears Holding Corp. bought
brokerage Dean Witter. Critics dubbed the offering “socks and stocks.” Sears
divested Dean Witter in the early 1990s.
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