How do Apple Pay and Google Pay handle the sensitive CARD Info?

 

2 1. Registering your credit card flow 2. Basic payment flow

3 The registration flow is represented by steps 1~3 for both cases.

𝐀𝐩𝐩𝐥𝐞 𝐏𝐚𝐲: It doesn’t store any card info. It passes the card info to the bank. Bank returns a token called DAN (device account number). iPhone then stores DAN into a special hardware chip.

4 𝐆𝐨𝐨𝐠𝐥𝐞 𝐏𝐚𝐲: When you register the credit card with Google Pay, the card info is stored in the Google server. Google returns a payment token to the phone.

5 When you click the “Pay” button on your phone, the basic payment flow starts. Here are the differences: 𝐀𝐩𝐩𝐥𝐞 𝐏𝐚𝐲: For iPhone, the e-commerce server passes the DAN to the bank.

6 𝐆𝐨𝐨𝐠𝐥𝐞 𝐏𝐚𝐲: The e-commerce server passes the payment token to the Google server. Google server looks up the card info and passes it to the bank. In the diagram, the red arrow means the credit card info is available on the public network, although it is encrypted.

7 Over to you: Apple needs to discuss the DAN details with banks. It takes time and effort, but the benefit is that the credit card info is on the public network only once.

Apple pay: the apple server looks at the card info and determines how to route. Since the card data is not stored on the apple server, apple server is not in the illustration. More detail: https://support.apple.com/en-us/HT203027 Google pay, more details: https://developers.google.com/pay/api/android/overview

How does Card Schemes make money ? - Thanks to bytebytego.com

 

1. The cardholder pays a merchant $100 to buy a product.

2. The merchant benefits from the use of the credit card with higher sales volume and needs to compensate the issuer and the card network for providing the payment service. The acquiring bank sets a fee with the merchant, called the “𝐦𝐞𝐫𝐜𝐡𝐚𝐧𝐭 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐟𝐞𝐞.”

3. 3 3 - 4. The acquiring bank keeps $0.25 as the 𝐚𝐜𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐦𝐚𝐫𝐤𝐮𝐩, and $1.75 is paid to the issuing bank as the 𝐢𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐟𝐞𝐞. The merchant discount fee should cover the interchange fee.

4.The interchange fee is set by the card network because it is less efficient for each issuing bank to negotiate fees with each merchant.

5. 5 5. The card network sets up the 𝐧𝐞𝐭𝐰𝐨𝐫𝐤 𝐚𝐬𝐬𝐞𝐬𝐬𝐦𝐞𝐧𝐭𝐬 𝐚𝐧𝐝 𝐟𝐞𝐞𝐬 with each bank, which pays the card network for its services every month. For example, VISA charges a 0.11% assessment, plus a $0.0195 usage fee, for every swipe.

6 6. The cardholder pays the issuing bank for its services. Why should the issuing bank be compensated? The issuer pays the merchant even if the cardholder fails to pay the issuer. The issuer pays the merchant before the cardholder pays the issuer.

7. 7 The issuer has other operating costs, including managing customer accounts, providing statements, fraud detection, risk management, clearing & settlement, etc.

BaaS vs Open Banking Vs Platform Banking

 Banking as a Service Providers

• What it is: licensed banks that enable other businesses to integrate digital banking and payment services directly into their own products. 
• How it works: the business’ frontend is connected to the BaaS provider via API, allowing the business to offer digital lending services, account management and payment services themselves in their own apps and websites.

Open banking providers (a.k.a third-party service providers)

• What it is: non-banks that access data from their customer’s bank account to provide account insights or trigger payments from within an app or website. 
• How it works: the open banking providers connect to the bank’s system via API to retrieve the data. Often, the API layer between the bank and the open banking provider is provided by an API banking platform. 

Platform banking

• What it is: banks integrating services from other providers, mainly fintechs, in order to offer their customers a broader range of financial services from one bank account. 
• How it works: depending on the type of set-up, the fintech’s services are usually fully integrated into the bank’s app/webpage user interface via API.

Does Amazon gets into creating checking accounts?

 Amazon had patented methods for linking bank account information and for prepaid cards as early as 2004. As seen below, these patents offer supporting insights into what a bank account issued by Amazon could look like.

The company’s competitive advantage lies in its cloud infrastructure and online hosting. In the event that Amazon does decide to offer full-fledged banking account services, AWS would enable it to have cloud-based operations that would be more secure than traditional banks or its other Big Tech competitors.

However, while Amazon has pushed into checking primarily through its Amazon Cash offering, it seems to have abandoned plans to create its own checking account so as to avoid becoming subject to strict banking regulations, according to The Information. Speculations around the launch of an Amazon checking account resurfaced in 2021, but the company has not made any official announcements so far.

GAFA Moment - What Amazon could do NEXT?

 Rumor: Amazon will introduce more BNPL options

Source: November 2021, The Financial Brand

Why it’s interesting: Amazon’s new partnership with PayPal’s mobile payment service Venmo will allow users to pay for their purchases using their Venmo account. The deal could also open doors to Amazon providing additional BNPL products at checkout, considering PayPal also offers a Pay in 4 service. Although Amazon already has a partnership with Affirm, The Financial Brand notes that many online retailers provide several BNPL options at checkout.

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Rumor: Amazon’s banking ambitions post-Bezos will grow.

Source: The Financial Brand

Why it’s interesting: Jeff Bezos has been a driving force behind many of Amazon’s key initiatives. It comes as no surprise that his transition to the role of executive chairman and the appointment of Andy Jassy as the new CEO raises lots of questions. For one, financial organizations wonder what Amazon’s future banking ambitions are.

Jim Marous, an expert on the digitalization of banking, says that “the decision by Bezos to step down from his current position will most likely only strengthen the commitment to financial services by Amazon.” Also, Jassy worked with Capital One, Stripe, Robinhood, and various other financial companies while leading AWS. And this experience may prove to be invaluable in helping Amazon innovate in the finance field.

Alyson Clarke, the principal analyst at Forrester, also points out that Amazon is likely to continue partnering with other financial institutions. She doesn’t think that “Amazon will — or needs to — get a license and become a bank. Any ambitions they have can be done via partnerships.”

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Rumor: Amazon is building a digital currency

Source: Coindesk

Why it’s interesting: Several job postings revealed that Amazon is assembling a team to work on a digital currency project in Mexico. One job posting noted that the product Amazon is about to build will “enable customers to convert their cash into digital currency” and then use that currency to shop for goods and services, including Prime Video.

Amazon’s Digital and Emerging Payments (DEP) division is in charge of this payment product. Another job posting said that the currency is geared toward emerging markets. It remains unclear what the value proposition of Amazon-owned currency is and whether it is blockchain-based.

Perhaps the currency could be used to send money abroad to friends and family to buy specific products from Amazon’s stores. Whatever the case, Amazon has once again shown its willingness to experiment with different technologies.

In July 2021, Amazon put up another job advertisement for a blockchain and digital currency expert who would use their “domain expertise in Blockchain, Distributed Ledger, Central Bank Digital Currencies and Cryptocurrency to develop the case for the capabilities which should be developed, drive overall vision and product strategy, and gain leadership buy-in and investment for new capabilities.” The expert would join the company’s payments team. Although Amazon has yet to announce a digital currency expert as of 2022, the job posting proves it’s exploring crypto behind the scenes.

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Rumor: Amazon is going deeper into the home

Source: July 2019, NY Times

Why it’s interesting: Amazon has previously worked with residential real estate brokerage Realogy to create TurnKey, a service to connect buyers and realtors on Amazon’s marketplace. However, the partnership between Amazon and Realogy was suspended in mid-2020 because of the Covid-19 pandemic. Realogy CEO Ryan Schneider said that “home services that require people being in someone’s home just doesn’t work in a Covid-kind of social distancing world.”

Nevertheless, Amazon is trying to wedge itself deeper into the home. By getting ahead of buyers as they start their search and incentivizing them with Amazon services, the company is aiming to create a massive cross-selling opportunity for its products.

It’s also a new way to grow distribution for its portfolio of home hardware devices such as Ring, smart devices like Alexa, and services like Amazon Home Services installation. The move could also help Amazon expand into home insurance or mortgage offerings.

Further reading: It’s Not Just Your Smart Speaker. How Amazon Is Coming For The $50T+ Commercial and Residential Real Estate Industries

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Rumor: Amazon reportedly had discussions about offering home insurance

Source: June 2018, The Information

Why it’s interesting: This rumor is based on an anonymous source that reported Amazon had discussions about offering insurance in conjunction with its connected home devices. However, none of Amazon’s existing investments or products tie to home insurance, at least in the US. While the company has made insurtech investments in India (such as in Acko) and a partnership in the EU to offer Amazon Protect, acting as more than a distributor of existing home insurance products seems unlikely.

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Rumor: Amazon is getting into mortgages

Source: March 2018, Housing Wire

Why it’s interesting: While Amazon has not made concrete plans, it has been making a series of strategic hires for lending with a focus on mortgage banking. The company hired a head of its newly formed mortgage lending division. In addition, the firm has a number of home services businesses such as Alexa, Prime streaming, and Amazon Fire Stick, and this could be its next move in owning the home.

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Rumor: Ripple is helping Amazon with cross border payments

Source: May 2018, CryptoDaily

Why it’s interesting: While cryptocurrencies saw a huge spike in interest in 2017, many of the world’s most prominent figures in financial services — including JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett — have outwardly cast it aside as mass speculation.

Amazon is known to take unconventional approaches to solve customer pain points, so it would not be surprising if it were to explore applications of blockchain across financial services products.

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Rumor: Amazon and PayPal are meeting with bank regulators to expand their financial services

Source: December 2017, American Banker

Why it’s interesting: Amazon and some other FAMGA (Facebook, Amazon, Microsoft, Google, Apple) members have been making headlines with rumors of moving deeper into financial services. Skeptics have punted back that the complexity of the regulatory landscape would inhibit them from entering the market. News that the firms are connecting with financial regulators suggests that regulations are not an inhibitor, but rather just an obstacle, and meeting with the Office of the Comptroller of the Currency (OCC) is one way to get the conversation going to overcome it.

Following this meeting, the OCC worked on a fintech charter for tech firms, including Amazon, which was supposed to include a centralized application that would give tech firms a limited (but universal) financial license vs. having to go state by state for approval. However, a federal court ruled in October 2019 that the OCC did not have the authority to issue such a charter. The OCC plans to appeal the decision.

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Rumor: Amazon is buying Capital One

Source: February 2017, American Banker

Why it’s interesting: This rumor was one of the earliest that suggested Amazon would buy a bank. Amazon has a decent amount of cash on its balance sheet and could use that cash to buy a small regional bank. Capital One, in particular, is already operating on the AWS cloud and is looking to make further inroads into personal finance, so it could be a good combination.

AMAZON in Insurance

 Amazon has turned its nascent interest in the insurance market into fully fledged products.

The earliest reported foray into the space was in April 2016 with Amazon Protect, a white-label service in the UK that provides accidental and theft insurance on consumer goods ranging from headphones to kitchen appliances. Claims are underwritten through a partnership with The Warranty Group’s London General Insurance Company. The program has since expanded to other European countries including Spain, Italy, Germany, and France.

In June 2018, The Warranty Group, which underwrites Amazon Protect in the UK and abroad, was purchased by Assurant for a rumored $2.5B. The acquisition could make it easier to expand Amazon Protect to new markets that are under Assurant’s umbrella of lifestyle protection products.

Amazon also teamed up with the insurtech startup Next Insurance to provide eligible Business Prime members with access to small business insurance policies. In less than 10 minutes, users can purchase professional liability, commercial auto, general liability, and other types of insurance coverage. Small business owners get a certificate of insurance digitally. Amazon Business Prime customers also get a 10% discount for purchasing professional liability and general liability policies.

NEXT Insurance is also a part of the new Amazon Insurance Accelerator, a marketplace where sellers can purchase product liability insurance. In addition to the marketplace, Amazon announced it was expanding its A-to-Z Guarantee. It now generally covers personal injury and property damage claims under $1,000, but could cover higher claims if necessary.

In May 2018, Amazon made an early insurance push in India by leading a $12M investment in insurtech startup Acko, as well as taking part in a $60M funding round closed in 2020. Acko offers traditional car and bike insurance policies, but it is increasingly focused on “internet economy” deals, which primarily consist of e-commerce, travel, and ride hailing-focused products such as an in-trip insurance program with Ola. On its new investor, Acko CEO Varun Dua said,

“The idea is to find some way to collaborate in the future. We’re a new age insurance company and [Amazon] believes it can create value.”

In September 2018, Amazon made its interest in the insurance market in India even clearer when it filed with the country’s Registrar of Companies to begin selling its own health, life, and general insurance products. In March 2019, Amazon received its corporate agent license from the Insurance Regulatory and Development Authority of India, clearing the way for the company to proceed further.

Amid the Covid-19 pandemic, Amazon began offering cost-free health insurance to its sellers in India, with Acko handling the policies, claims, and reimbursement.

In September 2019, Amazon rolled out a pilot for Amazon Care, a healthcare service for its employees in the Seattle, WA area. It came as part of the company’s joint venture with JPMorgan Chase and Berkshire Hathaway, called Haven Healthcare. But this venture disbanded in early 2021 as many of its initiatives failed to take off.

Amazon instead moved forward on its own — with great success. As of 2022, the virtual Amazon Care service is available across the US, and the company plans to launch in-person services in another 20 cities this year. The virtual services allow patients to consult with clinicians any day of the week, while patients in locations where in-person care is available can schedule home visits. Amazon has also expanded the service to other employers, including Silicon Labs and TrueBlue.

Spain-based bank BBVA has also begun to operate product sales on Amazon. This relationship could lead to the sale of the bank’s various products, including insurance.

Because Amazon would get a cut of each financial service transaction made on its platform, it may look to get other banks and financial institutions to sell their services online.

AMAZON’S CONSUMER LENDING

Amazon offers Amazon Prime cards to help serve 2 broader corporate goals: grow Prime customers and increase marketplace sales. To attract card customers, Amazon has been adding perks that are exclusive to Prime members. Cardholders are likely to spend more on Amazon than non-cardholders, which also benefits Amazon’s marketplace (and boosts customer loyalty).

On the consumer side, Amazon has tried out several partner cards for Prime and non-Prime customers, which include:

• Amazon Prime Store Card — Launched in 2015 with partner Synchrony Bank, it was Amazon’s first card exclusively for Prime customers, offering unlimited 5% cash back on Amazon purchases.
• Amazon Store Card — Offers some of the benefits of the Prime Store Card but for non-Prime customers. It does not offer the 5% cash back perk.
• Amazon Prime Rewards Visa Signature Card — Launched in 2017 with Visa, this card gives Prime members 5% cash back at Amazon and Whole Foods, 2% cash back at gas stations, restaurants, and drugstores, and 1% cash back on everything else.
• Amazon Rewards Visa Signature Card — Partner card with Visa for non-Prime customers that offers 3% cash back on Amazon and Whole Foods purchases, 2% cash back at gas stations, restaurants, and drugstores, and 1% cash back on everything else.
  
  
  
• Amazon Reload — A reloadable digital debit card available only to Prime members that offers 2% cash back on Amazon purchases. The card links directly to consumers’ checking accounts and can be reloaded on a recurring or one-time basis.
• Amazon Pay ICICI Bank Credit Card — In 2018, Amazon Pay and India-based ICICI Bank launched a Visa-powered, co-branded credit card. Prime customers of this card can earn 5% cash back on purchases made through Amazon India, while non-Prime customers get 3% cash back.
• Amazon Credit Builder — In Q2’19, Amazon partnered with Synchrony Bank to create a program that helps customers in the unbanked and underbanked income brackets boost their credit with a secured credit card. Like secured credit cards offered at banks, it requires a one-time deposit between $100 and $1,000 at the time of the account opening, which then becomes the card’s credit limit.
  

  Both the Amazon Prime Store Card and Amazon Store Card offer 0% financing for consumers on certain kinds of Amazon purchases:

  • Purchases of $150 or more if fully paid within 6 months.
  • Purchases of $600 or more if fully paid within 12 months.
  • Select Amazon purchases if fully paid within 24 months.

  Amazon is also frequently featured as a destination to spend credit card points by credit programs including Chase Freedom, Discover Cashback Match, and Blue Cash for Amex.

  In 2021, Amazon entered the BNPL market via partnerships with BNPL provider Affirm and UK-based bank Barclays. The Affirm partnership allows Amazon customers to pay for purchases exceeding $50 over a period of several months. Barclays clients can sign up for an Instalments by Barclays credit account. It enables Amazon UK shoppers to break up payments of $135 or more (£100) over a period of 3 to 48 months. The companies also launched a similar offering in Germany in 2020.

  FUTURE DEVELOPMENTS OF AMAZON’S LENDING OPS

  In 2018, Amazon extended the 5% cash back reward to purchases at Whole Foods on the Prime Rewards Visa Card. This is one example of how Amazon is adding perks and exclusive benefits for Prime customers, making the cards more competitive and attractive to customers in-store.

Amazon Lending

 Jeff Bezos has been more forthcoming about Amazon’s desire to build out its lending arm than other financial service offerings.

In his 2016 annual letter to shareholders, Bezos outlined Amazon’s goal of expanding Amazon Lending: By continuing to work with partner banks to manage the bulk of the credit, the retailer can mitigate credit risk and calm investor nerves.

Today, Amazon’s business lending is available in the US, UK, Germany, Canada, China, France, India, Italy, and Spain.

Amazon also offers consumer lending in the US in the form of partner cards and partnerships with buy now, pay later (BNPL) providers.

SMB LENDING

Amazon Lending initially launched in 2011 to help small businesses finance and sell more goods on Amazon. In 2018, Amazon Lending partnered with Bank of America Merrill Lynch to issue loans on an invitation-only basis that could range between $1,000 to $750,000.

But by 2019, reports surfaced claiming that Amazon’s lending operation wasn’t performing well, and the company was looking to breathe new life into the business. The revival strategy included new partnerships with Goldman Sachs in the US and ING in Germany.

As part of its deal with Goldman Sachs’ Marcus brand, the bank invited selected merchants to apply for a credit line of up to $1M. The application process is digital, and sellers are notified of approval results instantaneously. The credit line delivered through the Marcus brand comes with a fixed annual interest rate ranging from 6.99% to 20.99%. The amount approved can be drawn in several instances and repaid like a typical credit card.

This was the first time that Amazon opened up its treasure trove of sales data on its sellers to a third-party financial institution to make underwriting decisions.

In Germany, Amazon and ING provide loans between €10,000-€750,000 ($11,250-$852,327) to SMBs.

In 2021, Amazon continued inking new partnerships to expand its lending services. SMB lender Lendistry, which focuses on supporting businesses in underserved communities, collaborated with Amazon to launch the Amazon Community Lending program. It allows merchants to borrow up to $100,000 at annual percentage rates ranging from 8% to 9.9% and repay the loan in a period of up to 2 years.

From launch in 2011 to September 2021, Amazon and its partners issued over $800M in loans to SMBs nationwide.

In October 2018, Amazon expanded beyond loans to corporate cards issued by American Express in an effort to build its Amazon Business suite and attract new businesses to the marketplace. Amazon Business has over 5M business customers worldwide as of February 2022. The service has witnessed steady growth since its launch in 2015, and eMarketer projects it will reach sales of $59B in 2025.

The card serves as a way to attract customers that have been turned down by traditional banks due to limited business credit history. Initially launched in the US, Amazon Business Prime is now available in the UK, Germany, Japan, and most recently Canada.

Perks include giving businesses control over employee spend, analytics tools for spend and inventory management, and discounts on Amazon Web Services (AWS). Prime members receive extra incentives, like priority shipping and pricing.

Amazon also offers services such as Pay by Invoice, which allows selected small businesses to buy now and pay within 30 days — or 45-60 days, if the customer has an Amazon Prime Business account. In addition, it offers SMBs a revolving credit line and a pay-in-full credit line, in partnership with Synchrony Bank.

B2B e-commerce transactions are expected to reach $20.9T globally by 2027 — reportedly growing at a faster rate than online retail sales. Amazon is looking to replicate the network effects of its consumer arm with SMBs, as having more Amazon Business customers will improve its ability to connect B2B buyers and sellers to transact directly, unlocking cost savings.

Amazon Cash

 The Amazon Cash program bridges the gap between online commerce (using debit or credit cards as payment) and offline commerce, which relies on “cash on delivery” options like cash and gift cards.

Amazon Cash launched in April 2017 to allow customers to deposit cash, without a fee, to a digital account by showing a bar code (either printed physically or digitally) or their phone number linked with their Amazon account at a partner brick-and-mortar retailer, such as CVS or 7-Eleven.

Amazon Cash fits neatly into Amazon’s strategy of appealing to underbanked and unbanked populations — customers only need access to the internet and a printer to open an account, rather than requiring a bank account or a phone.

Prior to Amazon Cash, unbanked and underbanked populations were an unaddressed customer base for the online retailer, as discussed in the Traction section below.

Since Amazon Cash’s launch, Amazon has made a few key product developments

In May 2018, Amazon Cash extended its partnership with Coinstar to allow customers to deposit spare change at Coinstar kiosks and cash out digitally with the Amazon Cash app, instead of in cash or physical gift cards.

Coinstar has nearly 20,000 kiosk locations across mass merchants and select financial institutions. The goal at launch was to enable 5,000 kiosks with the new service by the end of 2018, with Amazon looking to roll out services to more kiosks down the road.

The location of kiosks — typically in grocery stores — is a newer cornerstone of Amazon’s business following its acquisition of Whole Foods. They are also found in high-traffic areas that Amazon competes with, including rival retailers such as Walmart. This partnership helps Amazon encourage customers to spend more on Amazon.com, and fits Amazon’s core strategic goals of strengthening the Amazon ecosystem and increasing participation.

PAYCODE: BRINGING AMAZON OFFLINE WITH WESTERN UNION’S NETWORK

A more recent pillar in Amazon’s fintech strategy is bringing parts of the world without the infrastructure to support digital payments into the Amazon ecosystem.

With PayCode, Amazon is allowing consumers that haven’t previously been able to purchase goods on Amazon to buy items through the site and pay for them in cash via QR codes. Amazon piloted PayCode in countries including Colombia, Chile, Hong Kong, Kenya, Indonesia, Malaysia, the Philippines, Peru, Taiwan, and Thailand. It then expanded the program to Barbados, Costa Rica, Jamaica, Kazakstan, and Uruguay, before opening it to the US in September 2019. PayCode has also been introduced in the Federated States of Micronesia, Marshall Islands, Mauritius, Palau, Philippines, and Tanzania.

The program is a partnership with Western Union, which is providing Amazon with the financial infrastructure it needs to enable offline cash payments. In these regions, consumers can pay for Amazon purchases by visiting a Western Union location and making a deposit in cash.

PayCode gives Amazon a strategic way of assessing which markets might make the most sense for future expansion of Amazon’s core retail platform.

PayCode could also represent a way for Amazon to eventually expand its influence among the underbanked in countries where it already has a live retail market.

AMAZON AND GREENLIGHT: A KID-FRIENDLY SOLUTION

In addition to targeting the unbanked and underbanked, Amazon has looked to leverage the Amazon Cash feature to tap into the next generation of consumers.

In mid-2015, the company added Amazon Allowance, which was later brought under the Amazon Cash umbrella. Using Amazon Allowance, and with parental consent, kids were able to set up their own Amazon accounts and make purchases using their Amazon Allowance. Parents could allocate recurring funds to their child’s account and get the added control of overseeing what their kids purchased. However, the company discontinued this feature in July 2020.

Amazon has also made investments in improving kids’ access to the platform.

In December 2017, Amazon’s Alexa Fund participated in a $16M Series A to Greenlight Financial, an alternative debit card issuer aimed at young consumers. With the card, parents can manage spending limits and allocate funds for their children through a mobile app. Three years later, Greenlight raised a $260M Series D to launch additional services for its user base of more than 5M parents and children.

Greenlight also announced a partnership with Amazon Kids+, a subscription plan for families that includes books, games, and movies. As part of the collaboration, families with a Kids+ subscription are eligible for a free one-year Greenlight plan.

Greenlight Financial’s core business is complementary with Amazon’s internal initiative of growing Amazon Cash customers by increasing penetration of younger shoppers.

AMAZON CASH’S TRACTION AND METRICS

Amazon hasn’t announced how many customers are using Amazon Cash, but it’s clear the market opportunity is large. A 2021 Economic Well-Being of US Households report found that 5% of the adult population — or around 12M Americans — is unbanked.

The international opportunity is large, too — for example, 190M citizens in India are unbanked and just 37% of adults have a bank account in Mexico. Amazon Cash could be an enabler for customer acquisition in markets that have high unbanked populations and entrenched local competitors, supporting Amazon’s goal of increasing the number of customers that transact on the Amazon platform.

FUTURE DEVELOPMENTS OF CASH-BASED OPS

Amazon is no stranger to looking outside its existing channels for growth opportunities.

The company could continue to expand the Amazon Cash and PayCode programs to other partners with high foot traffic (for example malls, colleges, grocers, etc.) or other geographies with highly underbanked populations and where QR codes are gaining traction as a payment method. Amazon could also leverage Whole Foods to launch more Coinstar kiosks, expanding the reach of the Coinstar partnership in a unique way.

AMAZON PAYMENT SERVICES

 In December 2020, Amazon launched Amazon Payment Services (APS), a payment service provider that covers the Middle East and North Africa (MENA) region. APS is a rebranded version of Payfort, a fintech startup acquired by Amazon in 2017. Amazon teamed up with a number of leading banks in the MENA region, including Al Rajhi Bank, Mashreq, and First Abu Dhabi Bank, to launch this payment service

Companies using APS can offer online customers the option to pay using global payment methods like Visa and Mastercard as well as local card schemes such as Meeza and Mada. Customers can also pay in monthly installments using cards issued by local and international banks.

APS offers other benefits as well. Businesses can reduce checkout friction by allowing repeat buyers to skip specific authentication steps. APS also provides security solutions that reduce fraud and chargebacks. Companies then get to enjoy a higher percentage of accepted payments. And teams can use APS to build dashboards, merge data from various sources, and keep track of business goals.

In 2021, APS expanded into insurance via a partnership with insurance provider Zurich International Life Limited. As a result, Zurich clients are able to digitally purchase insurance premiums. In February 2022, APS announced a partnership with Dubai-based payment solution provider Network International. The collaboration will allow Network International merchants in the United Arab Emirates to use APS’ payment solutions and gateway. The announcement follows APS’ new partnership with American Express in Saudi Arabia, which lets Amex customers pay for goods on merchant websites using APS.