Amazon is having discussions with JPMorgan Chase & Co., Capital One Financial Corp., and other banks to make a checking account like payment method for their customers. Having this form of payment would reduce the fees Amazon pays to financial institutions for credit and debit card purchases. The new product will target teenagers and those who do not already have debit/credit cards or bank accounts.
The project is still in its early stages, but the company apparently does not want to become a competitor to banks. Instead, it will partner with a bank to provide the service. “We think [Amazon’s] aim with expanding its financial offering is less about disrupting the financials sector and more about increasing engagement on its own marketplace,” the Bank of America analyst Justin Post said.
Experts say it is too early to say exactly what the product be, including whether it would give customers the ability to write checks, directly pay bills, or access to an ATM network.
People under 18 cannot normally open a bank account on their own, and students also tend to have extra charges for the privilege of having a bank account with a lower balance. One of Amazon’s challenges will be to solve the problems people have with traditional banks, such as high fees for things like overdraft or not meeting the minimum balance requirement.
A 2015 Gallup poll found that about 1/4 of Americans have “very little” or no confidence in banks, and 45% have only moderate confidence. These people, who do not approve of some of the bank fees, are the ones Amazon is looking to as customers to the proposed new accounts. In 2017, Amazon targeted these people with Amazon Cash, which provides a way for those without debit, credit, or bank cards shop online.
Amazon has also considered a reduced rate for Prime membership or other perks if someone chooses to pay with an Amazon checking account. This would ultimately save money for the customer as well as Amazon by removing the bank fees they pay when customers use bank credit or debit cards.