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How is Amazon disrupting the financial services sector?

Jeff Bezos

Amazon is unbundling financial services from every angle, according to a recent report by CB Insights

The report, Everything You Need to Know About What Amazon is Doing in Financial Services, recognises Amazon’s building of a host of financial services products and tools in the areas of payments, cash and lending. 

These, it notes, “support its core strategic goal: increasing participation in the Amazon ecosystem”.

In this article, we look more closely at Amazon’s activity in the payments sector. 

The modern banking experience 

There is ongoing speculation around the entry of Big Tech companies such as Amazon into the financial services sector. 

However, says CB Insights, to understand the implications of such a move, it is important to analyse the company’s current financial services strategy. 

To date, says the report, there is little sign of Amazon working to build the next generation of banks. Rather, the company has built and launched tools with the aim of:

  • Increasing the amount of merchants on Amazon and enabling them to sell more

  • Growing the number of customers on Amazon and allowing them to spend more

  • Continuing to reduce any buying or selling friction that exists.

The company has also made a number of fintech investments in international markets aimed at building a pool of partners that can achieve its overarching strategic goals. 

While these don’t equate to a traditional banking experience, CB Insights explains that “Amazon has taken the core components of a modern banking experience and tweaked then to suit [its] customers.”

It adds that “In a sense, Amazon is building a bank for itself - and that may be an even more compelling development than the company launching a deposit-holding bank”.

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Payments

Investment in payments infrastructure has been a core focus of the company, says CB Insights. Amazon Pay, for example, no offers a digital wallet to customers and a payments network for online and brick-and-mortar merchant service.

It is, however, the latest iteration of more than a decade’s worth of forays into payments functionality from the brand, which includes products such as Pay with Amazon and Amazon Webpay.

The report notes several techniques that have been employed by Amazon to improve its payments experience, including digital wallet technology, mobile payments developments and partnering with other merchant acquirers. 

On possible future developments in the payments sphere, CB Insights points to Amazon’s announcing an integration with Worldpay in 2019, which acts as a back-end intermediary between banks and credit card companies.

This is recognised as significant as it is a) a departure from Amazon’s previous IP strategy and b) could ensure millions of consumers have access to the brand’s Quick Payment option - Worldpay is one of the world’s largest payment processors. 

CB Insights points to Worldpay’s suite of technologies, such as POS systems and integrated card systems, as well as its provision of core banking processing solutions. 

Both, it says, are being leveraged by “non-bank chartered tech firms [...] to launch banking services, like checking and savings accounts”.

Elsewhere in the payments sphere, the report reinforces Amazon’s ability to develop technology, such as the development of Amazon Go stores and the brand’s ‘Just Walk Out’ concept. 

Read the full report on Amazon in the financial services sector here.

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.

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