It has been years in the making. Traditional banking institutions have been fending off the threat of self-made start-up fintech organisations since the concept of fintech first made its way into our vernacular.
The fear was that one, or several, of these tiny upstarts would wade their way into the financial services industry and render many of the existing processes redundant. It wasn't that an already established retail giant would muscle its way in and take another enormous step in its masterplan to take over the world.
That threat, of course, is Amazon and Jeff Bezos, the undisputed king of the online jungle.
It isn't a new notion. The term Amazon Bank is one that has been bandied about for several years now. The company already offers financial services; product financing and credit cards are the current extent of this, but more recently the retailer has been ruminating about making a retail type banking offering for everyday checking accounts.
Earlier this year, it announced discussions with JPMorgan Chase to establish checking accounts with the bank, targeting the young and the unbanked. The fear factor here was lessened by the joint venture aspects of the plan, given that the accounts would be Amazon branded Chase accounts – not Amazon accounts per se.
Given the vast data stockpiles that the company already has to hand like customer spending patterns and purchasing history, the ability to control the checking accounts of its 100 million-plus Prime users in the US, and eventually no doubt worldwide, would be hugely significant. The retailer already offers discounts to members for purchases made in its Whole Foods Supermarkets, and blanket retail discounts for Amazon Bank customers would no doubt be attractive to Besos' loyal and ever growing fan base - not to mention the power it could wield from monopolising the small debt or loan markets.
Still, in May, a note issued by Goldman Sachs suggested that analysts at the bank were not concerned with such a venture, and felt it more likely that the retailer would continue to concentrate on its core markets before spreading itself any thinner.
These regulatory issues have no doubt been what has prevented Besos from making this jump already. In the US it isn't a simple task to become a bank, even with the power and capital that Amazon has readily available. Gaining a charter is an arduous task that requires a significant amount of capital and the ability to prove endurance through times of intense stress.
However, following the advice of the Treasury this month, the Office of the Comptroller of the Currency (OCC) paved the way for fintech companies to make applications for special fintech banking charters – a route previously reserved for traditional banking institutions. It's early days, and there is no guarantee companies will take the OCC up on the offer but it's certainly a change in the regulatory framework that might make the likes of Goldman Sachs less confident that they will be able to maintain their relative superiority in the space, and fend off the charge from Besos.
It may well be that the de facto Lord of the Amazon, may become the King of the banking jungle sooner than anyone had anticipated.
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.