The intersection of technology and financial services continues to reshape the banking industry as digital platforms expand beyond their core businesses. Large technology companies are increasingly offering payment, lending, and financial management services through partnerships rather than pursuing full banking licenses. Amazon’s growing portfolio of financial products illustrates how embedded finance can deliver banking-like experiences while avoiding many of the costs and regulatory complexities associated with operating a traditional bank.
Amazon started with books and is now the third most valued company in the world.
There is plenty of talk these days about Amazon entering the banking system by getting involved with checking accounts. The big question is “Why bother?”
- Amazon already offers many banking-like products through partnerships with financial institutions, including a co-branded credit card, loans to small merchants and corporate credit lines.
- But efforts to provide checking accounts through bank partnerships appear to mark a more serious foray into the core of financial services. In fact, it seems like an intention to gain share as a disruptive provider.
Amazon already dabbles into financial services and co-brands two great card plans with Chase and Synchrony. Amazon offers value to the credit cards, with bonus features
- And with or without Amazon, the financial services marketplace is evolving with real speed.
- Powerful digital aggregators and fintech players are seeking to change everything from how banks acquire and serve customers to the markets they can serve to the revenue and profit models they follow. These added pressures should compel banks to disrupt their own strategies and operations.
Amazon National Bank makes for great headlines, but do they want to mess with slim margins, high risk and steadfast regulators? There are much better options, with less risk. Back office finance is one option, perhaps a closed-loop payments option makes sense. But why run the regulatory gamut as a depository institution? Who needs the regulators?
As embedded finance continues to evolve, technology companies will likely expand financial services through strategic partnerships instead of becoming regulated banks themselves. By focusing on payments, lending, and customer-centric financial tools, companies like Amazon can strengthen their ecosystems while leaving deposit-taking and regulatory oversight to established financial institutions. This partnership-driven model is likely to remain a key force shaping the future of digital financial services.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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