Can Amazon Cash open e-commerce up to millions of underbanked consumers?

Discussion
Source: Amazon.com
Apr 06, 2017
Matthew Stern

Amazon.com has made it easy to purchase through any number of payment methods on its site. But pre-loading an Amazon account with cash hasn’t been an option — until now.

This week, the e-tailer announced the launch of Amazon Cash, which allows customers visiting participating brick and mortar stores to deposit between $15 and $500 in cash into an Amazon account by presenting an account-associated barcode (on a smartphone screen or print-out) to the cashier. CVS, Speedway and Family Fare are among the retailers already on-board.

According to a study last year, 17 million Americans went without a bank account and 51 million fell into the category of “underbanked” in 2016. Reasons for people eschewing bank accounts range from severe debt to fear of add-on fees to lack of steady employment. Beyond the implied social problems, there is the added concern that this segment of the population in unable to shop online, a disadvantage programs like Amazon Cash aim to address.

Amazon is not the first company to attempt to bridge the gap between cash and online shopping. Since 2012, Walmart has enabled customers to order online with their “Pay With Cash” option. Customers order from Walmart’s online store, then bring their order number into a Walmart location and pay with cash at the register, authorizing the order to ship.

PayPal My Cash, which is available at outlets including 7-11, CVS and Rite Aid according to the PayPal website, serves a similar function as Amazon Cash. Deposits through PayPal MyCash, however, require a $3.95 service fee, whereas Amazon Cash has no service charge attached.

In fact, Amazon’s creation of Amazon Cash could be seen as a direct challenge to PayPal. PayPal had reportedly been in talks with Amazon earlier this year about a potential relationship that would help the e-tailer reach the underbanked, according to a Barron’s Next article. 

DISCUSSION QUESTIONS: Will the unbanked and underbanked take advantage of Amazon Cash in significant numbers? What would the impact be on other retailers, and the economy at large, if Amazon effectively facilitates e-commerce for the unbanked and underbanked?

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"Yes, I think many people will take advantage of Amazon Cash, particularly members of the Generation Z and Millennial age groups..."
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19 Comments on "Can Amazon Cash open e-commerce up to millions of underbanked consumers?"


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Max Goldberg
Guest

The biggest reason to participate in Amazon Cash rather than its competitors is that there are no fees. If Amazon can get enough brick-and-mortar locations to participate, this could be a breakthrough in e-commerce for the unbanked. Services like PayPal and Green Dot hit customers with fees for every purchase, diminishing the value of the service and robbing users of dollars to spend on purchases. Leave it to Amazon to break that mold while driving customers to its website.

Ricardo Belmar
BrainTrust

Amazon Cash will certainly appeal to the underbanked and unbanked population, however it is not clear what the buying power is for this population. If the primary reasons for a group of people to be underbanked have to do with a lack of steady income then it seems questionable to me that this group will suddenly want to spend large sums of money on Amazon’s website. I’m sure there is some amount of spend that this group would like to apply on Amazon but it may not be a significantly large amount.

The future of cash payments is constantly under debate in the financial services community and it is interesting that Amazon is facilitating e-commerce for cash spending — one weakness in e-commerce’s armor. This may have the most impact in purchasing of low-cost household merchandise that consumers may typically buy via cash.

Marko Kovac
Guest
2 years 7 months ago
While the problem of unbanked and underbanked consumers not shopping online may be a very real problem for Amazon, I don’t think that the concept of Amazon Cash as described above will radically change the way this group shops. Here’s why: There are already plenty of ways to shop online without a bank account of any kind. The above solution is only incrementally easier than going to CVS and purchasing a Visa gift card and then entering the details of the card when you go to make a purchase. Another issue Amazon may face is that many consumers make online purchases as soon as they realize they need or want something. Household goods and office supplies that just ran out, a new book or movie they just read about, etc. With Amazon’s proposed solution, consumers would either have to decide that they always want to carry an Amazon balance, or they would have to go to one of the physical store locations above, load their account, then go online and make the purchase. Despite these… Read more »
Brandon Rael
BrainTrust

Another innovative and aggressive step taken by Amazon to expand their reach into the the unbanked and underbanked population. This is unprecedented, as all the other payment providers offer credit options that come with significant fees and limited credit lines for those with low credit scores.

Once this is adopted, the reach of this capabilities extends into the brick-and-mortar locations and economies of scaled are achieved, this move not only expands the potential new consumers for Amazon but may significantly reduce the dependence on actual cash for transactions, both online and in-store.

Meaghan Brophy
BrainTrust
Meaghan Brophy
Senior Retail Writer
2 years 7 months ago

Yes, I think many people will take advantage of Amazon Cash, particularly members of the Generation Z and Millennial age groups who are unbanked and underbanked. Its ease of use and lack of fees make Amazon Cash a much more attractive option than PayPal, gift cards and prepaid credit cards. This could have a potentially harmful impact on brick-and-mortar retailers, as consumers who previously bought products almost exclusively in-store with cash shift to online purchases.

Adrian Weidmann
BrainTrust

I’ve been waiting for this one! Amazon Cash will indeed be successful with the unbanked and underbanked population. Companies like Cardtronics along with banks continue to make millions of dollars off of this market demographic through service fees. Amazon will be able to attract significant customers and guess where they will shop? With Amazon! It will be interesting to see how Amazon facilitates these transactions. Typically these transactions are through an ATM located at various retailers.

Lyle Bunn (Ph.D. Hon)
Guest

This Amazon approach to pre-paid and gift card commerce is a necessity for online commerce. Will it activate ordering by the credit card-less or cautious and the unbanked? This looks to me like the other side of the page that Walmart has long used to facilitate in-store shopping.

Tom Erskine
BrainTrust
2 years 7 months ago

Why is this news? There are multiple prepaid debit card options in the market today that enable under-banked and un-banked consumers to get online. This is somewhat innovative in that it eliminates the cost of gift card printing, shipping, handling, etc., but I don’t think it will make a dent in the adoption of Amazon by this segment.

gordon arnold
Guest

Like everything else, Amazon will sell this forever or until they too close even if they lose more and more money doing it. The better question is, when will Amazon be dealing with a competitor that can make money at these efforts? And where is that competitor coming from? The stumbling block for the 21st century retailer is the size, location and content in an all new brick&mortar store. The key is a single, comprehensive, easy-to-use, fully integrated point of sale system based on real time calculations.

Ed Dunn
Guest
2 years 7 months ago

There are several categories of unbanked customers. The underclass unbanked customers described by Amazon for this service are unlikely going to pursue this “food stamp voucher” process that will stick out like a sore thumb while everyone else in line are using Apple Pay.

The unbanked customers that are more likely going to use this service are tweens and teenagers with their cash allowance, which is a bigger untapped unbanked market to pursue.

Steve Montgomery
BrainTrust

The un or underbanked have had a number of options for several years to be able to make purchases online. More importantly, those methods did not limit them to one online retailer. Will this add incremental sales to Amazon? Yes. Will this be a huge win for Amazon? No.

Cate Trotter
BrainTrust

This looks like another case of Amazon getting in there first when it comes to e-tailers. Whether it will result in huge uptake by the unbanked and underbanked, I’m not sure — some of that will be down to marketing of the service and individual shopping habits. Depending on what you buy and how you like to shop, this might be very useful, or just a pointless offering because you’re already in-store spending your cash. But the lack of fees makes it an attractive alternative to some of the options already out there and once people are used to using it it may be harder to get them to convert to other similar options that come along.

Naomi K. Shapiro
BrainTrust

There may be multiple other credit/debit cards available, but there’s only one Amazon. And that name is a magnet for anything commercial, financial, hypothetical, whimsical, or, in short, successful. That is to say, people will flock to Amazon because of its already unstoppable name, image, output, accomplishment … and at no additional charge? Bullseye!

Scott Magids
Guest
2 years 7 months ago
The underbanked and unbanked population, though largely under the radar, is far larger than most of us realize, and given that we are moving rapidly towards a cashless society and a new era of online commerce for everything from clothing to everyday groceries, there has to be a solution to include this demographic. I don’t think Amazon is approaching its Amazon Cash project as a solo deal; it fits in with other Amazon initiatives like Amazon Go, their brick-and-mortar grocery concept. Amazon Go, an advanced shopping experience that would require some sort of electronic cash, will need to accommodate unbanked customers if it is to succeed, and this is the way to move financial services outside of its narrow box of checking accounts and mortgage loans. In our white paper, “Making the Emotional Connection,” we talk about the need for financial services providers, including non-bank entities like Amazon, to create an emotional connection with their users and how that connection leads to greater loyalty and a bigger share of wallet. Amazon is thinking outside the… Read more »
Stefan Weitz
Guest

Unclear to me if this will have a material affect on Amazon’s bottom line. While I love the idea of increasing access to online services for the unbanked, I’m struggling with the use case of a person going to CVS to put money on a card to then going to Amazon to then get it shipped when they could likely go to a retailer in their town and pick up the product. This is why it’s so important for B&M retailers today to offer things like price matching to Amazon — to remove the incentive people have to head there.

david salisbury
Guest

Amazon Cash connects the dots in new ways for consumers, and really has no disadvantages. Since many consumers live beyond their means, the new consumer is not just discount-hungry, but needs free options to better manage their accounts. PayPal, in spite of great services and a convenient interface, are expensive.

More than anything, I believe this hits Walmart’s key customer segments. The future Amazon stores and even AmazonFresh make a direction competition vs. Walmart the next big game-changer of retail.

However, mobile payments has not scaled as fast in North America as in other parts of the world, and it’s likely even more convenient ways of paying will be coming soon.

Bottom line, Amazon is giving consumers and shoppers more options, and all of these “new features” add value to Amazon Prime and its dominating eco-system.

Kenneth Leung
BrainTrust

It is another low risk approach for Amazon to service under-tapped market. If the pickup rate is low they can quietly shutter it. Any incremental dollars they tap is additional wallet share.

Shep Hyken
BrainTrust

And, why didn’t they think of this before? Seriously, this is a great opportunity to connect with an entire market (a HUGE market) of consumers who have not yet had the opportunity to do business with Amazon.

Dan Frechtling
BrainTrust

Amazon wants to be able to sell everything to everybody. Jeff Bezos has said he wants Prime to be so accessible and so appealing that not using it would be irresponsible. The “variety” strategy, which use to be confined to product selection, now extends to payments.

AmazonCash opens ecommerce for lower income families. Those earning less than $25K use cash for 48% of their transactions, and those who earn $25-50K use it for 33% of transactions, according to PayNearMe. Others with a higher than average preference for cash include millennials and the elderly.

The utility of Amazon cash is bigger in countries outside the US where cash is more commonplace. Cash use in Eastern Europe exceeds 70%. Ecommerce in India and Russia is commonly paid COD. So the opportunity is larger in developing countries.

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Braintrust
"Yes, I think many people will take advantage of Amazon Cash, particularly members of the Generation Z and Millennial age groups..."
"Amazon will be able to attract significant customers and guess where they will shop? With Amazon!"
"There may be multiple other credit/debit cards available, but there’s only one Amazon."

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