Amazon in talks with banks to create checking account product

Javier Stokes
March 6, 2018

Earlier this year, Amazon and JPMorgan teamed up with Warren Buffett's Berkshire Hathaway to tackle rising healthcare costs for their U.S. employees. According to the Wall Street Journal, however, all that is set to change. It also confirms predictions for how a company like Amazon might enter the market. Consultants McKinsey past year described Amazon and other digital platform companies as a bigger threat to banks than fintech firms.

That's probably because Amazon would apparently work with the big financial firms as opposed to trying to pull an end around on them. It's a question of intent and execution. It looks like this is a very limited move and they're partnering with JPMorgan.

Probably the best way to read the Journal's piece is to go ahead and assume that whatever it says Amazon won't do and/or whatever it claims is still "unclear", Amazon actually will do. "Those are the kind of possibilities we might have to face".

A good idea? For Amazon, yes.

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Delta Air Lines says it will look into ending all its discounts with groups that appear to be "politically divisive". The governors of New York, Connecticut and Virginia and several mayors have made similar online overtures.

Despite the billions of dollars going through Amazon's accounts yearly, one area the retailer hasn't really explored is payment processing. In contrast, the manufacturing bit of the business, the core business of financing and lending from a bank's balance sheet, generated 35% of profits, with an ROE of 4.4%.

For customers, the payoff would presumably be some combination of low fees, free Prime membership, or Amazon-specific spending rewards.

Amazon is also interested in offering accounts to people without bank accounts, the report added.

JPMorgan Chase was the primary partner named by the report, but talks are still in the early stages, and other deals may yet be struck. The sources said that the company's plan is target younger consumers and people without bank accounts. "And so some of it gets passed on to the customer in terms of lower prices and lower spreads". "You know, that's called competition".

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