OPINION


IBS Journal May 2018


43


From bookstore to bank – could this be the making of Amazon almighty?


For many years Jeff Bezos’ online shop has had almost every conceivable item in its range. Now apparently, Amazon wants to expand and offer some kind of current account to its customers. Roger Niederer provides a reality check


Roger Niederer


Head of Merchant Services, SIX Payment Services


W


hen it comes, Amazon’s rumoured financial offering will be aimed at young people and other consumers who do not currently have their own account. If true,


what does the project mean for retailers and the payments industry, and to where can the growth of Amazon lead?


Will Amazon now become a bank?


Amazon does not want to become a financial institution in its own right; it is understood to be currently in discussion with US financial giant JPMorgan. The reason for this approach is likely to be that if Amazon built its own banking division and applied for a banking licence, the company would face much stricter regulations that could slow its aggressive growth in other markets. In any case, it is clear that retailers understand the benefits of having a strong payment service provider at their side that brings the necessary expertise and can quickly and easily integrate new payment methods into existing processes and systems.


Is this e-commerce expansion without limits?


In the beginning, Amazon mainly sold books; it then offered CDs and DVDs to its customers. Today, through Prime, customers are able to stream music, video and much more across smart devices. Thanks to Alexa, its huge selection of online shops can be accessed by voice command and Amazon even wants to take control of the delivery of its packages. This announcement hit the stock values of UPS and FedEx. With Amazon Pay, the company has had its own payment service for a while, but gained only moderate traction with other online stores. Here, it seems, the giant had reached its limits.


The company recently opened another lucrative online business with its cloud service, Amazon Web Services. The plan to offer bank accounts is just another link in a long chain of new business ideas. The direction of Amazon’s journey is not yet clear but it is likely that CEO Jeff Bezos is intent on continuing growth. Industry experts assume that in the long term, only one in 10 online retailers will remain competitive with this current strategy.


There is growing scepticism surrounding the opaqueness of what exactly Alexa stores and what happens to the recordings. Connected to a fully networked smart home, the digital ‘roommate’ could know a lot more and potentially share it: What time people get home? When do they go to bed? Worrying about the potential for very personal information being shared is likely to outweigh the positives of Alexa & co.


With the new bank account function, Amazon would also have access to the financial data of its customers. Using this new data it would eventually prove very easy to determine a customer’s individual willingness to pay a certain price for a particular product and then offer it at exactly that price.


However, we must bear in mind that nobody is forced to shop at Amazon and invite Alexa into their home. In addition, awareness of data protection is increasing among both individuals and governments. In the future, customers will be increasingly concerned about whether they really want to give their personal data in such a concentrated way to a single provider. Payment service providers form an attractive way out, as they, for example, handle the credit card data on behalf of the merchants, sparing them compliance effort.


How much influence does Amazon have in daily online commerce?


Like Apple and Google, Amazon has been accused of being a “data octopus”. Since the introduction of language command assistants, the accusation is more topical than ever.


www.ibsintelligence.com 43


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