Is Amazon Competing for Your Members?

Amazon has been a threat to retail for many years. While brick and mortar stores have pointed fingers at Amazon for their decline in foot traffic, some credit unions are beginning to fear competition from Amazon as well. Amazon has yet to implement any banking features in the U.S. but they have already begun taking deposits in India. Delivery staff can now accept cash as payment upon delivery, as well as collect deposits through a Cashload feature in a version of Amazon Pay. Amazon allows their India-based customers to deposit any surplus cash from their purchase into their Amazon Pay account, and they can deposit additional funds to be used toward future orders or bills within partner websites and apps. Amazon allows deposits up to 10,000 rupees ($143 U.S. dollars), which is quite a bit, considering the average Indian household makes about $50 per month. Could such services be on the horizon for U.S. customers? Here’s what we can expect from Amazon in banking:

The Office of the Comptroller of the Currency (OCC) announced that it will consider applications for fintech charters, which means Amazon could apply. However, many anticipate that Amazon will integrate more fintech services without forming a traditional bank, as it would require them to set aside huge amounts of capital, which they can currently use to grow. Amazon is on the path to building a bank for Amazon, rather than the Bank of Amazon… for now.

Amazon also has some advantages over traditional banks and credit unions:

Cash to burn. As one of the largest companies, Amazon has deep pockets to pull from. To get their payments program off the ground in India, they have spent more than $27 million in capital to produce just over $1 million in payments.
Room for failure. Amazon’s strategy has never included a fear of failure. They value innovation and are not afraid to run with new ideas that may not pan out. They are pros at taking a loss and reworking it into a success.
Massive captive audience. They have roughly 310 million active customers, 100 million Prime customers, 50 million Echo owners, and 5 million sellers. They have been able to cross-sell and up-sell their customer base at impressive rates, which means it’s likely they could get them to jump on board with their banking services too.
Incredible customer data. While credit unions are known to keep significant data on their members, Amazon has even more experience in the data realm. From years of customer transactions, as well as data from streaming platforms via Amazon Prime, they have a deep log of personal information telling them what their customers watch and what they buy.

There are a lot of doors open to Amazon and only time will tell in what direction they take their financial service platforms. They have already begun dabbling in payments, cash deposits, credit cards, lending, and even insurance. The sky's the limit for Amazon, and it will bode well for credit unions to keep an eye on their financial services ventures, as they could quickly become a force to be reckoned with in the credit union industry.