Is Amazon Building The Next Generation Bank?

By Patrick Moorhead - May 14, 2021

Over the years, Amazon has been steadily building a product line that supports its goal of increased participation in the Amazon ecosystem. The company has built, bought, partnered and launched tools that expanded merchant participation and activity, number of customers, increased cart and checkout size and reduced friction on both the buy and sell side.

Seemingly unstoppable by regulators or competitors, the company is armed with numerous patents, virtually unlimited cash, a massive, devoted customer base and unending data. With this, Amazon could represent a real threat to traditional banking. However, Amazon remains very focused on building financial services products that support its core strategic goal: increasing participation in the Amazon ecosystem and solving inefficiencies for its 310 million active customers, 100 million Prime customers, 50 million Echo owners and 5 million sellers worldwide (according to company data).

Amazon has also made several fintech investments to support its core strategic goals. All of this points to the conclusion that the company isn’t likely to build a traditional deposit-holding bank. Instead, it seems focused on taking the core components of banking and using them to best support its merchants and customers. As a CB Insightsstudy summarized, “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.”

Still, there are several categories where traditional banks shouldn’t rule out Amazon as a significant competitor. With Amazon approaching $1 trillion in market capitalization, it can’t be ruled out of any race. The company has long been experimenting with financial initiatives, including partnering with major US banks that offer accounts in the online marketplace. All the while, the company continues to expand and grow its existing financial offerings. As the Office of the Comptroller of the Currency moves to introduce policy that will level the playing field in banking, I believe fintechs, big tech and startup disruptors may have a more competitive advantage. 

Amazon’s DNA is to be the platform. The company is rooted in distribution, integration, logistics, convenience and instant gratification. When Amazon applies those roots to financial services, it can help financial institutions process, underwrite and service loans at a lower cost than what banks currently incur while fulfilling a higher demand. The company has no reason to be the lender in this case. It simply takes a cut of the FI’s business while offering vertical ancillary solutions like KYC and AML at an additional cost. 

Beyond banking

Amazon uses Just Walk Out technology, using computer vision, sensor fusion, and deep learning to enable shoppers to enter an enabled store, grab what they want and leave. Just Walk Out technology detects what products shoppers take from or return to the shelves and keeps track of them in a virtual cart. It is currently in more than 20 Amazon Go stores, two Amazon Go Grocery stores, and in third-party customer locations including HudsonTD Garden, and OTG stores.

The company has also launched Amazon One, which uses palm-scanning technology to eliminate the need for any physical payment method. Consumers can also tell Alexa to Pay for gas, movie tickets and utility bills, through partnerships with fintechs and other companies. According to CB Insights ' Industry Analyst Consensus, the global voice shopping market is poised to grow from $2B to $40B by 2022.

Amazon isn’t the only player in the automated retail technology space. AiFi makes retail stores autonomous with its compelling camera vision platform. Through its unique approach of partnering with retailers, AiFi can provide a hybrid experience tailored to stores’ existing customer bases (users can still opt for a traditional cashier). For example, just this last week the company announced the opening of a 5,000 square foot autonomous store in Denver, CO, a collaboration with Choice Market. While in total, AiFi has ten live locations to Amazon Go’s 29, it’s delivering healthy competition, and purportedly a better customer experience.  

Wrapping up

While Amazon has had numerous product pivots and failures along its way, it still isn’t afraid to iterate as it moves from e-commerce to omnichannel enablement. Next-generation bank? Probably not. But one way or another, Amazon is likely going to use its vast data, distribution and enablement to change the way its customers experience banking.

+ posts
Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.