Banks and Credit Unions Should be Very Afraid if Checking Accounts Are on Amazon's Agenda

Checking accounts are already a loss leader for banks and credit unions. They aren’t a high margin product, but are offered to create a nexus to customers who may then interact with the institution in other higher margin deposit and lending products.

The Wall Street Journal reported yesterday that Amazon is in discussions with JP Morgan and perhaps others banks about coordinating their efforts so that Amazon can offer a checking product to its customers.

While conventional wisdom is that Amazon would not go through the process of obtaining a banking license in order to offer banking products directly to customers, conventional wisdom needs to take a look at Amazon’s history as a company, or at the very least its history over the last 20 years.

Amazon started as a bookseller, but has become the second largest company in the world (and, in the opinion of this author, will surpass Apple and remain the world’s largest company for a very long time) as a result of a strategy that involves learning about market inefficiencies (be they in retail, in hosting, in media and entertainment, or perhaps in health care) and then pouncing on the opportunities that those inefficiencies create.

I am not going to say that JP Morgan doesn’t run an amazing retail operation. But, when they open that operation up to Amazon to discuss partnerships, Amazon will see the distribution opportunities and close the inefficiencies faster than you can imagine.

Or, it may take years, but it will happen.