LONDON: August 21, 2017. Is amazon going to add bank loans and mortgages to its product portfolio? According to David Jinks, head of Consumer Research at e-commerce delivery company ParcelHero, the UK finance industry can bank on it:

"Is Amazon preparing to move into banking? A report earlier this year that Amazon was considering buying the U.S. bank Capital One highlights the fact that controlling how we buy goods, as well as where we buy them, would make a great deal of sense for the U.S. giant.

"Speculation continues that Amazon is interested in Capital One in the USA. It's one of the top ten American banks, worth around US$334 billion in assets, and has a huge credit card portfolio.

"While Amazon's planned purchase of Whole Foods has got the U.S. government concerned about retail monopolies, an acquisition in a totally unrelated sector should not result in similar problems. Capital One has already made its services compatible with Amazon's Alexa smart speaker and the potential future opportunities are very significant.

"Local bank branches may now be harder to find on Main Street than dodos, but the UK's online banking industry is mushrooming. Well over 9,000 bank and building society branches have closed in recent years; but online around 50 new banking sector companies have been announced since the regulations were eased in 2013.

"However, we believe the established banks' stiffest battle will come not from a direct banking industry competitor, but from that ultimate in industry disruptors, Amazon.

"As a result of the loosening by regulators, an A-Z of new companies from Atom Bank to Zopa have been announced.
Amazon's undoubted interest in Capital One probably points the way to the future. Amazon could create its own UK bank from scratch, but that would involve overcoming significant regulatory hurdles. A number of the 'newbie' UK challenger banks are already consolidating and some may well welcome an approach from Amazon. A challenger bank takeover looks the most likely scenario. Owning its own bank would be a key step towards Amazon's long-term goals.

"Amazon has already become a fully-fledged money lender to UK SME retailers. Amazon makes loans to merchants in the U.S., UK, Europe and Japan through Amazon Lending. The division has made loans totaling well over US$1.5 billion. Using its internal data to assess suitability, Amazon typically provides loans for three to six months of between US$1,000 and US$750,000.'

"The company also already has its own UK credit card. The Amazon Platinum Mastercard gives reward points whenever you shop on it; but, behind the scenes, its UK card is actually run by NewDay, with Amazon simply acting as a credit broker. Were Amazon to create its own bank, or buy an existing provider, access to full credit card information would give it even more vital data about its customers' shopping behavior.

"Amazon's payment services are also advancing steadily: these allow online vendors on its Marketplace site to take payments across the U.S. and Europe. In 2016, the e-commerce firm rolled out 'Pay with Amazon' across France, Italy and Spain — a PayPal-like service that allows users to pay for non-Amazon purchases including government services, insurance and travel.'

"It's not just retailers that benefit from Amazon's lending and credit services. In some markets the e-commerce giant is now offering a deferred payment facility to consumers too.

'Would we really want an Amazon bank account, or do we only trust the established big banks? According to a recent survey by Accenture, 40 percent of global Millennial respondents reported that they would consider switching over to an Amazon (or Google) bank account. Millennials in the U.S. were even more enthusiastic, with 50 percent saying they would consider banking services from the e-commerce giants.

"Think of the perks an Amazon bank could use to lure more people to join the Prime Membership scheme. From more attractive rates of APR, to added points when you buy on its cards, Amazon could attract a new group of Prime members. And remember those members spend around twice as much as non-members with Amazon."

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