September 21, 2020

So Amazon builds, step by step, a bank to suit you | Innovation

So Amazon builds, step by step, a bank to suit you | Innovation


If a banker says three times in front of a mirror Amazon, Jeff Bezos appears and ends his business without raising an eyebrow. At the moment, there is no urban legend like that, but it is undeniable that American giant generates, in equal parts, fascination and panic among professionals in the financial sector. They live with Amazon, they even cooperate with the company, but they fear that one day they will Roll up and become an almost unbeatable competitor.

At the moment, Amazon is already prowling several financial businesses, and consequently sticking small bites out of traditional entities. They may seem insignificant, such as the announcement of this Tuesday, the 13th, of an agreement with the fintech Spanish Fintonic, whose users will be able to finance purchases of Amazon gift cards for up to 1,000 euros, in a maximum period of four months, at an interest rate of 0% APR. But it seems a dangerous indication for traditional entities.

It is estimated that calls swipe fees, the fees for swiping or passing a card represent an annual business of 90,000 million dollars for banks, payment entities such as Visa and payment processors such as Stripe and Paypal. For Amazon, one of the two great advantages of this agreement with Fintonic is that it allows you to save those transaction costs: that is, a person spends 1,000 euros on their trade and Amazon does not have to share a penny with a card issuer. of credit or with the bank that issues it.

Saving the distances, paradoxical, Amazon acts here as those businesses that do not accept cards because they do not want to pay commission to anyone. The other advantage is obviously the attraction of customers, eager to spend at the gates of Black Friday and Christmas but perhaps without all the liquidity they would want or no desire to borrow.

Amazon sources in Europe comment that they already have agreements of this type with other companies, "although in this case we have been a little more creative". Amazon has specific commercial offers for customers of Openbank (Santander group), Coinc (Bankinter) and loyalty programs for American Express cards.

For its part, Fintonic achieves the notoriety and relevance that gives to be able to present "the first collaboration of this type between Amazon and a European company", as it says its press release and confirm from the company created by Jeff Bezos. And, above all, it shows that your strategic change is serious. It does not want to be a simple roboadvisor -Advanced financial adviser-, but a financial supermarket, in which its users are not only aware of the bank's commissions, but also can take out insurance, change electricity companies or finance their Christmas purchases at Amazon.

This particular step has a risk -impagos and delinquency-, but in Fintonic they rely on the big data: they know almost everything about the finances of their more than 500,000 users, and therefore they trust that those who receive the 0% credit at Amazon – they need at least 450 out of 900 on their Finscore index, which measures up to 160 variables- they will return the money in the marked terms.

Lupina Iturriaga, CEO of Fintonic, is particularly proud of that Finscore index, which already uses about a dozen banks. "The agreement with Amazon allows us to reach another type of client, who does not normally ask for a loan, but with these conditions he can be encouraged," he explains.

  • The do it yourself Amazon financial

Speaking of a company the size of Amazon (Last year it earned an income of 177,870 million dollars and its market value is over 800,000 million dollars, approximately 30% more than the entire Ibex 35) all these agreements look like parrot chocolate. But they are significant because they show how the company is approaching the financial business. It does not want to create a bank, but to offer certain services that will help its main objective: to increase the relevance and the billing of the Amazon ecosystem.

Amazon wants that the sellers of its portal sell more, that the consumers spend more and everything with the minimum friction

As one explains report of the CBInsights consultancy Last June, "Amazon is not building a traditional bank that serves all types of customers. On the contrary, he has taken the basic components of a modern banking experience and adapted them to fit his clients, both buyers and sellers. " In short, Amazon wants that the sellers of its portal sell more, that the consumers spend more and that everything happens with the minimum possible friction. Friction It is experience of use, yes, but it is also those commissions that others take.

At the moment, the most clear bet in the financial field is Amazon Pay. According to CBInsights, at the end of 2016, it already had 33 million consumers in 170 countries. But there are more bets on the way or in development, such as its offer of loans through Amazon Lending, which operates in the United States, the United Kingdom, India and Japan.

Amazon already has programs with Openbank (Santander), Coinc (Bankinter) and American Express.

It goes back to the two Amazon customers: the sellers, specifically small businesses, who are financed to increase their activity on Amazon, and the buyers, through a series of credit cards, for both Amazon users Prime as for those who are not subscribed to this service. And, as if that were not enough, Amazon is also starting to offer insurance, through the Amazon Protect brand, which offers policies for consumer goods for sale on the platform. The service is available in several European countries, including Spain.

The formulas, brands and details vary, but the premise is always the same: Amazon seeks to promote the sales of its suppliers, the purchases of its consumers and the relevance of its platform. That is why this agreement with Fintonic is a good example of how Amazon looks at the banking business: it wants to promote its platform to the maximum, while trying to control the financial business it generates. Without hurry or pause, Amazon is learning to build its own bank.

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