When Will Amazon Offer A Checking Account?
CEO of Amazon Jeff Bezos (Photo by SAJJAD HUSSAIN/AFP via Getty Images) AFP via Getty Images  OBSERVATIONS FROM THE FINTECH SNARK TANK  Speculation that Amazonwhich already offers a host of financial services including payments and lending productswill offer a checking account has been around for a few years now. This doesnt seem to be a problem for challenger banks who rely on existing banks licenses and compliance capabilities to deal with regulatory matters. And Googlewhich will launch a checking account soon doesnt seem to have a problem with the regulatory aspects of a checking account. A flurry of recent articles on various websites have raised the possibility of an Amazon checking account, including articles on:  MyBankTracker. A June 3, 2021 article said, Various news outlets have reported that Amazon is looking to venture into the financial services industrya checking account could be in the works.  A June 3, 2021 article said, Various news outlets have reported that Amazon is looking to venture into the financial services industrya checking account could be in the works. MoneyUnder30. A June 2, 2021 article claimed that Now Amazons getting ready to roll out checking accounts. Its still in the early stages, but it looks like eventually it could come into fruition.  A June 2, 2021 article claimed that Now Amazons getting ready to roll out checking accounts. Its still in the early stages, but it looks like eventually it could come into fruition. DoughRoller. A June 3, 2021 article reported Amazon recently slipped the news that it will be offering an online checking account. The company, known for taking over existing businesses and products, looks to be preparing to jump into banking.  The DoughRoller article cites the March 2018 WSJ article as its source of information and the other two articles dont cite any sources. Personally, I havent found any recent sources indicating, or even hinting at, plans for a checking account from Amazon. A recent consumer study by Cornerstone Advisors suggests there would be strong interest from consumers for an Amazon checking account (and from other Big Tech players like Google, for that matter). To be accurate, the study asked Amazon Prime members:  If Amazon bundled a checking account in with your Amazon Prime membership for an additional $10 annual fee (on top of the current Prime membership fee), what would you do?  Overall, 62% of US consumers are Amazon Prime membersincluding seven in 10 Millennials and two-thirds of Gen Xersso the study captures a good percentage of the consumers most likely to be in the market for checking accounts. The study found that roughly four in 10 Gen Zers and Gen Xers, and almost half of Millennials, would open an Amazon checking account if it were bundled into the Prime subscription. Of those Prime members, more than half said the account would be their primary checking account. Interest in an Amazon checking account Source: Cornerstone Advisors  This is pretty remarkable considering that 90% of the consumers expressing an interest in a fee-based Amazon checking account dont currently pay any monthly fees on their checking accounts. After announcing a partnership in 2020 with Goldman Sachs to provide small business loans to merchants on its platform, Amazon demonstrated its willingness to partner with large financial institutions. With strong interest from Amazon Prime members willing to pay an up-charge on their annual Prime fee to get a checking account from Amazon, it would appear to be a no-brainer for Amazon to partner with a financial institution to offer an account. On the other hand, you could argue that it doesnt make sense for Amazon to partner with just one bank for a checking account offering. After all, Amazon is a platformand platforms provide a choice of providers for products and services, not just one. When Amazon announced its Goldman Sachs partnerships, wireframes of a small business lending marketplace that would enable multiple financial institutions to participate were leaked (allegedly). I dont think so. The Economics of a Checking Account Marketplace Dont Add Up  Q. A. Not a lot. Consumers dont shop around for checking accounts very oftenthey add new accounts in response to promotions or when looking for specific features like early access to their paycheck, high interest rates, or international money transfer. Simply getting a per account fee on a checking account marketplace wouldnt be worth Amazons effort (Im assuming Amazon wouldnt get an ongoing cut of the interchange revenue). The argument for partnering with a single financial institution seems much stronger. Sure, Amazon would have to split interchange revenue with its partner, but the companys ability to have insight into the spending activity of its best customersPrime customerscould pay off in many ways. I can think of two reasons:  1) Amazon wants to create a digital account opening capability. Many banks still struggle with digital account opening. Cornerstone Advisors has found that more than half of financial institutions are interested in partnering with a fintech company for digital account opening. With Amazons deep information on consumers, it could perform identity verification, KYC, and account onboarding functions more efficiently than the banks can. A partnership withor acquisition ofa fintech in the account opening space makes more sense than Amazon acquiring a bank, which has been a point of speculation for a long time. 2) Amazon is building a better checking account. This is, fundamentally, what Google has done. The Google Plex account will have a number of unique and intriguing features that leverages Googles merchant connections and technology capabilities. Surely Amazon can come up with something that leverages its merchant platform and the many Amazon Prime members that make a large percentage of their transactions on the Amazon platform. The Coming Amazon Checking Account  My money is on #2 (it used to be on #1). With the strong demand among Amazon Prime customers for an Amazon checking accountand their willingness to pay for itit seems like a no-brainer for the company to offer one. The regulatory burden excuse for not partnering with Chase or Capital One is nonsense. Amazon didnt partner with either of those banks because the economics of the partnership didnt make sense. And previous speculation that Amazon would acquire a large bank makes no sense at all. If Amazon were to acquire a bank, it would find the smallest, cheapest bank with the right charter and license it could find. With the expected launch of the Google Plex checking account in Q3 2021, it would be great if Amazon launched a checking account soon. The combination of the two products would really shake up the banking market. For a complimentary copy of the Cornerstone Advisors report Competing with Google Plex and the Digital Banks, click here.