Finance

Financial Services Entry of Amazon

An E-commerce giant [Amazon] entering into Financial Services

To understand Amazon’s existing strategy in Financial Services, we should find answers to the following three questions:

  1. What Amazon has launched and built?
  2. Where the company is investing?
  3. What recent products tell us about Amazon’s future ambitions?

It takes a very focused approach for building financial services products: to increase participation in Amazon Ecosystem.

Entering into Financial Services domain has given the company three main benefits:

  1. An increasing number of customers, enabling each customer to spend more.
  2. An increasing number of merchants, enabling each merchant to sell more.
  3. Reducing any buying/selling friction

In this article, we provide a brief overview of Amazon’s dominance in Payments, Cash, and Lending space.

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Amazon Payments

Amazon has invested a lot in payment infrastructure over the last few years. Needless to say, it is a key priority for Amazon to make payments more cash efficient and frictionless for customers. Over the last few years, it has launched digital wallets through Amazon pay, acquired tech talent of failed startup GoPago, and built a variety of tech in house.

Amazon GO (Grocery Store)

The “Just Walk Out” technology uses computer vision, sensor fusion, and advanced machine learning to enable a frictionless payments experience, and is based on technology that the company has patented in the past. Today, 22 Amazon Go stores are live in Seattle, New York, San Francisco, and Chicago.

Amazon Cash

The Amazon Cash program bridges the gap between online commerce, using debit or credit cards as payment, and offline commerce that relies on “cash on delivery” options like cash and gift cards. Prior to Amazon Cash, un-banked and underbanked populations were an unaddressed customer base for the online retailer.

Amazon Allowance: A kid-friendly solution

With parental consent, kids can set up their own Amazon accounts and make purchases using their Amazon Allowance. Parents can allocate recurring funds to their child’s account and get the added control of overseeing what their kids purchase.

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Amazon Lending

Today, Amazon has expanded its business lending to the US and UK. In consumer, Amazon offers lending in the US in the form of partner cards.

1.Amazon SMB Lending

In October 2018, Amazon expanded beyond loans to corporate cards issued by American Express in an effort to build its Amazon Business suite and attract new businesses. The card is a way to attract customers who have been turned down by traditional banks for limited business credit history.

Perks include giving businesses control over employee spend, analytics tools for spend and inventory management, and discounts on AWS. Prime members receive extra incentives, like priority shipping and pricing.

2. Amazon Consumer Lending

Amazon offers Amazon Prime cards to help serve two broader corporate goals: grow Prime customers and increase marketplace sales. To attract card customers, Amazon has been adding perks exclusive to Prime members. Cardholders are likely to spend more on Amazon than non-cardholders, which also benefits Amazon’s marketplace.

Concluding Remarks

Amazon’s strategy in financial services has been focused on supporting its core strategic goal: increasing participation (both from buyers and sellers) on its platform. In practice, Amazon has relied much more heavily on internal product development than partnerships, M&A, or investments to broaden its financial services offerings.

 

Author: Priyank Singal

About Author: I am a current MS in Global Finance student at Fordham University in New York City. Being a CFA Level II Candidate and a Computer Engineer, I am a fintech enthusiast who loves playing around with large amounts of datasets. I have a varied set of interests from running marathons to cooking to reading books.

 

Related: Automation in the Financial Services Industry

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