Amazon can go big in finance but is unlikely to open a bank, Goldman says

  • Amazon has many opportunities in the financial services, but is unlikely to build a standalone banking operation, according to analysts at Goldman Sachs.
  • Instead, Amazon will remain focused on offering "complementary" services through bank partnerships that ultimately drive sales volume and traffic to its core site.
  • Amazon has partnered with a number of banks for a variety of financial products.
Jeff Bezos
Photo by Franziska Krug
Jeff Bezos

Amazon has vast potential to expand in the financial services field, but it's unlikely to build a "standalone" banking operation anytime soon, according to Goldman Sachs.

In a note published Tuesday, analysts at Goldman Sachs wrote that Amazon's base of over 100 million Prime customers and its vast amount of shopping data puts the company in a unique position to become a major player in the finance space. At the same time, consumers are showing that they'll buy financial products from tech companies.

But Amazon is unlikely to open a standalone banking service because of the added regulatory burden and credit risk that would follow.

"Despite Amazon's opportunity to expand in financial services, we believe the highly regulated nature of the industry and an unwillingness to take on credit risk on its balance sheet will temper its aspirations to build a standalone banking operation," Goldman Sachs wrote in the note.

Instead, the analysts predicted that Amazon will remain focused on offering "complementary" services through bank partnerships that are primarily designed to drive sales volume and traffic to its e-commerce site.

Amazon is partnering with Bank of America for its merchant lending program, and is reportedly working with J.P. Morgan and Capital One for a new "checking-account-like" product.

Amazon currently offers a number of different financial products. Amazon Pay is a PayPal-like service that allows shoppers to buy through their Amazon accounts. Amazon Lending is an online lending program offered exclusively to Amazon sellers. The company also launched Amazon Cash, which lets customers move money from gift cards to their Amazon accounts, as well as some co-branded credit cards.

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