Amazon sells just about everything, so why not financial services, too?
The e-commerce giant inked a deal with Wells Fargo to offer interest rate discounts on loans to students who are Amazon Prime members. The bank, which is the second largest student lender in the US, will shave off half a percentage point for Amazon “Prime Student” customers who take out student loans to attend college or are looking to refinance their existing student loans.
The Wall Street Journal says no money is changing hands between Amazon and Wells Fargo. Regardless, the deal makes sense for Amazon, which has been making a play for students. Amazon Prime is only $49 a year for college students, half the cost for a normal Prime membership. Besides free two-day shipping, Amazon Prime comes with a number of other services that appeal to young people, like streaming music and video.
Amazon has yet to get directly involved in financial services but is playing more on the periphery. It’s been discreetly rolling out a “Pay With Amazon” checkout option for websites and apps, where customers can make purchases using the payment information attached to their Amazon account. That puts it in competition with Apple, Google, and PayPal in digital payments.
It’s estimated that Amazon reaches 47% of American households, according to research firm Consumer Intelligence Research Partners. Given that reach, it’s in a strong position to distribute standard financial products like student loans, for sure. Amazon also works with a large number of small businesses that sell their merchandise on its site, which gives it a good view into their finances. It could make sense for Amazon to offer loans for its merchants, similar to Square or American Express. It launched a pilot small business lending at the end of 2011. Of course, getting into lending also means additional regulation, something most companies shy away from.