Amazon has created a voice-based digital assistant, a smart door lock, and a home security camera. So why not offer a version of home insurance that takes advantage of all that data? As The Informationreported last week, that appears to be exactly what Amazon CEO Jeff Bezos is interested in doing. By monitoring each aspect of a home’s security, Amazon could, in theory, offer lower premiums than established insurance providers.
The same logic applies to many of Amazon’s other forays into finance. Amazon specializes in creating tech-based ecosystems that generate valuable customer data, like online retail, online video, and the connected home. Once such an ecosystem is established, the company is well positioned to layer on products and services that manage related payments, credit needs, or risk. That possibility has banks and other financial institutions nervously wondering how they might be able to compete with one of the most trusted brands in America.
Since March, when the Wall Street Journal reported that Amazon was exploring the introduction of a checking account, speculation about the company’s financial ambitions has reached a fever pitch. But in reality, Amazon has been quietly and deliberately entering banking for over two decades. Here, we look back at the company’s track record, which suggests that Amazon’s interest in financial services should come as no surprise to Wall Street. Bezos may never apply for a banking license, but he is actively engaged in siphoning off revenue streams that finance has long taken for granted, while asserting a primary position in customers’ banking relationships.
Every financial services product Amazon has developed in-house
Amazon was granted a patent for its first financial service, 1-Click shopping, in 1999, after developing the technology two years prior. Other online retailers had experimented with ways to store customer information and enable speedy checkout, but Bezos and his team were the first to patent the idea. Leading retailers, including Apple, soon licensed 1-Click for their own online stores. 1-Click’s patent expired in 2017, but the technology is still an effective tool for decreased cart abandonment.
In 2006, Amazon introduced interest-free financing as a way to encourage purchases of large electronics. Today, it uses the service to drive sales on Prime Day and Cyber Monday.
Amazon began experimenting with credit card rewards in 2009 in partnership with MasterCard, which began offering Christmas-season Amazon gift vouchers to its customers in Japan.
Amazon has been lending to merchants on its platform since 2011, when it first introduced small business loansranging from $1,000 to $750,000. To determine a merchant’s eligibility, the company simply reviews its selling history. As of last June, Amazon had issued over $3 billion in loans.
In 2013 Amazon took aim at PayPal with its “Pay and login with Amazon” service, which allowed third-party merchants to accept customers’ Amazon credentials. Like PayPal, Amazon created a button that merchants could add to their checkouts. The service pulled in stored data on Amazon’s active customers, then 215 million strong. Initial partners included Gogo, the airport wireless provider.
Amazon launched Amazon Coins in late 2013 as a promotion for Kindle and Kindle Fire devices. Today, the product is Amazon’s equivalent of the iTunes gift card, with one Amazon Coin worth one cent. The coins can be used to purchase software for any Kindle, Kindle Fire, or Android device within the Amazon Appstore.
Amazon ventured into mobile payments with Amazon Wallet, an Android app that launched in 2014. But the company pulled the app less than six months later, on the heels of the Fire Phone’s lackluster debut.
Eyeing Square’s success, Amazon introduced the Amazon Register in 2014, a point-of-sale payments service for small businesses. Like Square’s signature dongle, Amazon Register plugged into phones and tablets. To compete, Amazon offered merchants lower processing fees than that of rivals. But the product failed to catch on, shuttering in early 2016.
Amazon made a renewed push into the credit card space in 2015 with its Amazon Prime Store Card. The card, which offered Prime members 5% cash back on Amazon.com purchases, was designed to both incentivize Prime sign-ups and encourage customer stickiness. In typical fashion, Amazon took a bare-bones approach and made the card out of paper at a time when plastic upgrades like Chase Sapphire Reserve’s metal offering were coming into vogue.
As installment loans came into fashion in 2015, Amazon introduced Pay Monthly for larger purchases. It discontinued the service in spring 2017.
While it moved away from installment loans, Amazon doubled down on the credit card space in 2017 with its Prime Rewards Visa Signature Card, an expanded version of the Prime Store Card offering 2% cash back at gas stations, restaurants, and drugstores, and 1% cash back on all other purchases. After acquiring Whole Foods, Amazon extended the card’s 5% cash back provision to include the grocer.
Also in 2017, Amazon launched and grew Amazon Cash, a way for consumers to make purchases on Amazon.com using cash deposited at a brick-and-mortar retail partner. By November 2017, Amazon Cash was up and running in close to 8,000 7-Eleven stores.
Last but not least, Amazon began offering a debit card to consumers in Mexico this past spring, dubbing the product Amazon Rechargeable. In Mexico, where just one-third of consumers have a credit card, the company positioned Amazon Rechargeable as an “easy and practical way” to convert cash into an e-commerce payment method. Amazon Rechargeable may offer clues as to how the company might approach the U.S. checking account that it is reportedly developing alongside JPMorgan Chase.
