Amazon in Talks with JPMorgan Chase & Co. About a Banking Product

On Monday, the Wall Street Journal reported that Amazon is in talks with JPMorgan Chase & Co. and possibly others about launching a new checking-account-like product.

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This banking-account-like product is aimed at customers without bank accounts and younger customers that often do not maintain bank accounts due to monthly service fees.

Young Millennials also seem to ditch credit cards and prefer to stick with cash or prepaid debit cards for their shopping.

However, there is also a large number of unbanked and underbanked Americans that may find an Amazon-banking-style product attractive.

And of course, it is vitally important for Amazon to provide means to purchase goods from their online store for customers that do not use bank accounts or credit cards.

Retailer Banking Product Not New Idea

The idea of a retailer promoted banking style product is not new. Ironically, Amazon’s largest rival, Walmart, has been offering such a product since 2012 in partnership with American Express called Bluebird.

The primary benefit of these pseudo checking account products are that they offer similar features to a full service bank checking account:

• Direct Deposit (a common feature offered by employers)
• Cash deposits at retail locations
• Account to Account transfers
• Fraud and Purchase protections
• Mobile check capture
• ATM Access
• Use card at any location that accepts the Financial Network’s cards (Visa, Mastercard, American Express)

Looking at this list, this is about the extent of the banking many consumers need.

Certainly, having an account at a full-service bank offers additional features, but for many this bare-bones style account is sufficient.

While current cards do not offer a digital wallet or Payment method such as Google Pay or Apple Pay, they can be added as funding sources for those services.

The JPMorgan Chase & Co. Connection

The Wall Street Journal reports that Amazon is in talks with a number of financial providers, but it seems JPMorgan Chase & Co. (Chase) may be the best partner for an Amazon program.

The bank already offers an American Express/Walmart Bluebird style product called Chase Liquid. Chase’s reloadable prepaid program has many of the same features, except they charge a monthly fee of $4.95 while Bluebird has no monthly fee.

According to a recent Consumer Reports article, Bluebird and Chase Liquid are rated as the number 1 and number 2 respectively prepaid debit card programs in the U.S.

Chase already offers an Amazon-branded Visa card to Amazon customers. This is different from the Amazon store card which is managed by Synchrony Bank, which is one of the largest store credit card issuers in the U.S.

How Amazon PrePaid Card Could Work

Looking at the Amex/Walmart Bluebird program, it is very easy to see how the Amazon program could work with Chase.

Fundamentally it would be similar to the Bluebird program, except that AmazonCash may roll into this product.

Whole Foods Markets would add additional retail outlets for cash deposits or may even offer some additional “banking-style-services” such as check deposits or limited withdrawals.

This could be done with advanced ATM machines as Chase is already leading the banking industry in that departments by converting many of its branches to offer more automated banking.

But Chase also has over 15,500 ATMs nationwide, adding a lot of existing access points for this program.

For Amazon, the single biggest benefit would be the integration of the banking service as part of the Amazon account. Since many Americans choose direct deposit for their paychecks, the would bring access to their money one step closer to the Amazon ecosystem.

Presumably, the service would become part of the Prime Membership, also adding another reason for consumers to add Prime to their account.

FDIC Insured?

This gets a bit tricky. In the Bluebird product by Amex/Walmart, there is a delayed FDIC coverage as the money needs to flow from the card to a custodial account. They estimate this may take at least one business day.

“When you add funds to your Personalized Bluebird Account, we will place the funds into custodial accounts we maintain for the benefit of Bluebird Members at one or more FDIC-insured banks (currently American Express Bank, FSB and American Express Centurion Bank). If one of the banks in which we have placed your funds fails, your funds should be insured by the FDIC up to the maximum per-depositor coverage limit (currently $250,000 in most instances). Funds on the Temporary Card are not insured by the FDIC.

Your Bluebird funds will not receive the benefit of FDIC insurance before they are placed in one of the Custodial Accounts referenced above. We will place funds into the Custodial Accounts not later than the business day after those funds are credited to your Bluebird Account. FDIC insurance coverage is contingent upon our maintaining accurate records and on determinations of the FDIC as receiver at the time of a receivership of a bank holding a Custodial Account.”

American Express Bluebird FDIC Statement

However, in the Liquid Chase product disclosure, Chase appears to claim immediate FDIC insurance as there is no talk about transferring monies:

“While your account is not a deposit account established in your name, the funds on your Card are held by us in a subaccount established for the Chase Liquid Card program and are covered by FDIC insurance. You may only have one Card associated with an account at any one time. If your Card is closed (for example, because it is lost or stolen) we may issue a new Card connected to the same account.”

This could be another reason for Amazon to pick Chase and make their checking style product part of an Amazon-branded Chase Liquid product.

Banking Equals More Customer Loyalty

Adding a checking-account-style product would add even more customer loyalty to Amazon and offer another feature for Prime Membership.

As younger people are increasingly willing to purchase clothing and other products often thought to be difficult for eCommerce online, adding banking will just make it one step simpler for consumers to shop on Amazon.

In turn, this is good news for third-party marketplace sellers as they continue to benefit from new features that Amazon adds that increase customers and sales on the platform.

What do you think about Amazon considering getting into a checking-account-style product? Head over to our Facebook Discussion Group or use the comments section below.