By Emily Glazer, Liz Hoffman and Laura Stevens
Amazon.com Inc. is in talks with big banks including JPMorgan
Chase & Co. about building a checking-account-like product the
e-commerce giant could offer its customers, according to people
familiar with the matter.
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
added.
If the product emerges, it would further inject Amazon into the
lives of those who shop on its website and at its Whole 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.
Already Amazon is building a delivery service that 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 Financial Corp., 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 against challengers.
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 lender, 38% said they would
trust Amazon to handle their finances equally as they would a
traditional bank.
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 CEO 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 space with no clear winner yet. The company has had
limited success in getting its own system, Amazon Pay, accepted at
other online merchants.
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.
Of course, 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.
--AnnaMaria Andriotis contributed to this article.
Write to Emily Glazer at emily.glazer@wsj.com, Liz Hoffman at
liz.hoffman@wsj.com and Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
March 05, 2018 07:14 ET (12:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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