Banks have been warily watching Amazon.com Inc. for signs it would threaten their world. The tech giant’s latest move looks more like an opportunity — at least for one of them.
A proposal to start offering a product similar to checking accounts is “for now not showing any signs of disrupting the industry,” Brian Foran, an analyst at Autonomous Research, said in a note to clients Monday. “While the ‘Amazon effect’ has dictated trading in several sectors, for banks it seems a much tamer story.”
Amazon is in talks with JPMorgan Chase & Co. and Capital One Financial Corp. about the product, people familiar with the matter said Monday. The targets are millennial consumers, the people said, asking not to be identified because the discussions are private. The strategy could help Amazon lower fees it pays to financial firms and give it a bigger window into customers’ income and spending habits. The Wall Street Journal reported the talks earlier Monday.
The offering, if it comes to fruition, would be yet another link in Amazon’s extensive web of ways to touch every aspect of people’s lives, from food shopping at Whole Foods, to reading or listening to books, to streaming music and videos. After upending other retail businesses including groceries and health care, banks have long feared they might be next.
The finance industry has been concerned that major tech companies, not only Amazon but also Facebook Inc. and Apple Inc., might try to sideline banks by handling more of their customers’ electronic payments, offering financing or accepting deposits — even if those services open them up to more regulation. The new venture may lessen that concern.
“Why put up all the capital that’s required to run a bank and why pick up all the extra expense and headache of running a bank when you can go to a Chase and any number of smaller banks and have them license their bank?” Ali Raza, managing principal at the payments consultancy Blue Leviathan, said in a telephone interview.
Amazon has already made forays into the financial arena during its transformation from a book store more than 20 years ago. Amazon Pay allows consumers to pay for products on third party sites without reloading their credit-card information. More than 33 million people use the payment system, and Amazon has lent more than $3 billion to small businesses that sell on its platform since 2011, according to a research report by CB Insights earlier this year.