This post is a part of a series of 4 long forms about the penetration of Big Tech (Google, Apple, Facebook, Amazon = GAFA) in Financial Services. This part 1 is about Amazon.
To start off Amazon’s Financial Services Playbook actually revolves (primarily) around it’s own ecosystem of solutions and problems that it’s participants face. Amazon’s strategy in financial services has had a razor sharp focus (e.g. Lending used to be driven directly by Bezos) on accelerating its core agenda of increasing participation (from both buyers and sellers) on its platform i.e. buyers to buy more and seamlessly, sellers to sell more and more profitably (for Amazon).
To put this in simpler context:
- Buyer: If Amazon offers the buyer a credit card (which no one else will in most cases) and offers low cost debt (lower than others) or gives you an Amazon Bank Account with the above 2 features (even though closed loop i.e. it works only on Amazon) – You will end up buying more stuff from Amazon with a payment instrument powered by Amazon so that you don’t need to authenticate (like entering card numbers etc.) or don’t even need to pay for it upfront (pay later) i.e. frictionless checkout.
- Seller: If Amazon offers the seller a credit card (which no one else will) and offers low cost debt (which also in most cases no one else will since they’re self employed) or gives them an Amazon Bank Account with any of the above 2 features enabled (no matter how small/large) – You will end up buying more inventory to sell more on Amazon!
Both the above scenarios show what Amazon has been trying to do with Financial Services while keeping regulators at bay (most of the products are offered by lenders with licenses e.g. Banks etc.) and Amazon might only be short of a full fledged bank account (purposefully to avoid increased scrutiny subject to Banks). The bank account might also see the light of the day considering Neo Banks are doing so without the need / requirement to have a Banking License (e.g. Google Plex Accounts – Powered by Citi Bank).
What this means is that Amazon almost has all the products that traditional FS players are offering, catering to some or the other need of the participants on the Amazon ecosystem (semi-closed loop).