Citing people familiar with the matter, the The Wall Street Journal reported the talks aren’t limited to JPMorgan, with the online retailer reaching out to other big banks as well. The idea, which is still in its infancy, would be to create a checking account-type product that would be attractive to younger consumers and those who already have banking accounts.
However the talks evolve, the Journal reported Amazon isn’t interested in becoming a bank. The new product would push the company further into the lives of its customers, who not only take advantage of its Prime service, but get their groceries from its Whole Foods-owned supermarkets, stream its original movies and other content from its online offering and control smart home devices via Alexa, its voice-activated personal assistant. According to the Journal, offering a checking account product can help the company reduce the fees that financial firms get from Amazon, as well as give it more data on customers, like income and the ways in which they spend their money. (See more: Most Shoppers Would Use Amazon Cryptocurrency.)
While Amazon is known to enter a market and disrupt it, in this case it is looking to partner rather than transform an entire industry. According to The Wall Street Journal, in the fall it sent out a request for proposals to several banks and has been going over proposals from the likes of JPMorgan and Capital One Financial Corp. It's not clear what the product would look like and whether or not customers will be able to write checks, pay bills or withdraw money from ATMs.
The fact that Amazon is opting to partner rather than do it on its own gives credence to the argument that while regulation put in place after the financial crisis is costly for banks, it protects them from competition from new challengers. After all, if Amazon went into banking it would be subject to the same rules and regulations that banks are and would be prevented from expanding too aggressively. It would also likely face opposition from lawmakers and other industries. (See also: Amazon Market Cap May Cross $1 Trillion in a Year.)
The e-commerce giant has reportedly been looking at ways to get into the finance market for some years now as it seeks to find ways to lower the fees it has to pay the banks and payment processors. It's not clear how much money Amazon would save, but enabling customers to directly withdraw cash to make purchases will lower those costs.