19 March 2018
Amazon wants to develop a checking-account-like product aimed at young customers and those without bank accounts. Photo: Reuters
Amazon wants to develop a checking-account-like product aimed at young customers and those without bank accounts. Photo: Reuters

Amazon in talks with banks to launch products for Millennials

E-commerce giant Inc. is in talks with large banks such as JP Morgan Chase to develop a product that is like a checking account and targeted at younger customers and those without bank accounts, Wall Street Journal reported, citing people familiar with the matter.

The discussions are still in the initial phases, and it is not known whether they will be successful, the sources said.

If the product materializes, its targets may include customers of Whole Foods, readers at Kindle and users of Amazon’s voice-activated assistant Alexa.

But regardless of its final form, the initiative will not turn Amazon into a bank, the sources said.

About six in 10 consumers who don’t have bank accounts possess a smartphone, CNBC reported, citing data from the Pew Charitable Trusts.

These “unbanked and underbanked” people mostly use cash or checks for their purchases. Online shopping is hardly easy for them.

In a report released by Goldman Sachs in 2015, 33 percent of so-called millennials said they do not see themselves having a bank account in the next five years, CNBC reported.

Millennials, or those born between the early ’80s and early 2000s, are not enthusiastic about dealing with banks or using credit cards as they are more inclined to lose their trust in banking institutions than older generations.

To encourage spending among low-income shoppers, Amazon rolled out a discounted prime service for those joining the US government’s Supplemental Nutrition Assistance Program, also known as food stamps, with an electronic benefit transfer (EBT) card, which works much like a debit card.

It is also cooperating with convenience store chain 7-Eleven, which accommodates its delivery “lockers” for pickups of Amazon orders.

The online retailer also introduced the Amazon Pay payment service in the physical stores of Whole Foods to reach out to offline consumers.

Amazon started to transform from an online bookstore into an online retailer more than 20 years ago. It has been striving to expand into the financial sector, on the strength of its massive consumer data and potent bargaining power.

Other tech giants such as Facebook and Apple also plan to venture into the electronic payment business.

As early as 2005, retailing giant Wal-Mart applied with the Federal Deposit Insurance Corporation for a charter to build an industrial bank in Utah so that the company can handle credit card transactions by itself.

But the plan sparked opposition from the banking industry, forcing Wal-Mart to withdraw its application in 2007.

This article appeared in the Hong Kong Economic Journal on Mar 7

Translation by Jonathan Chong with additional reporting

[Chinese version 中文版]

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