How Amazon is shaking up financial services

Who needs a banking charter anyway?


Not Seattle-based Amazon. The most feared company in America keeps finding new ways to eat into banks’ revenues, even though it is supposedly on the wrong side of the industry’s regulatory moat.

The e-commerce giant is already making small-business loans, finding ways to cut into banks’ swipe-fee revenue, and competing against prepaid card issuers.

And several recent developments suggest that Amazon has substantially broader ambitions. Checking accounts, small business credit cards and even mortgages all appear to be in the company’s sights.

While some banks stand to benefit from partnerships with Amazon, many more will have to reckon with the competitive threat that Jeff Bezos' company poses.

In a report last fall, the consulting firm McKinsey calculated that the sales and origination side of banking, or what the report calls distribution, accounted for 65% of the industry’s profits. Meanwhile, the use of bank balance sheets to provide financing comprised just 35% of profits.

The larger of those two categories presents a big opportunity for the likes of Amazon, according to the report.

“With their superior customer experience, they can sell an ever-wider range of products to their loyal customers. The manufacturing end of many businesses is fading from view, as the platform companies increasingly dominate the distribution end of multiple businesses, providing a wide range of products and services from a single platform,” the report stated.

Here is a look at parts of the banking business where Amazon is either already competing or is reportedly considering a foray.