Amazon is Looking at Creating Pseudo-Checking Accounts for Young Shoppers

It appears Amazon is in the early stages of attempting to create a checking account system aimed at young customers and people without bank accounts. While the retail giant hasn’t made any definitive statements about the new gambit, it could be part of the company’s push to control every step of online transactions — from purchase, to delivery.

At this point, very little is known about what exactly Amazon is trying to build. But The Wall Street Journal reports that people familiar with the matter say that the retail giant is hoping to secure a partnership with a large bank rather than actually form an Amazon bank itself. The process started last fall, when Amazon solicited pitches from institutions like JPMorgan and Capital One on creating some form of branded checking account system that would appeal to young and unbanked Amazon users.

It seems like Amazon is looking to thread the regulatory needle, establishing a program that would furnish customers with money to spend on Amazon products without subjecting the company to the laws that govern financial institutions.

Given Amazon’s clear ambition for complete economic domination, its foray into the banking sector isn’t particularly surprising. The company acquired video doorbell company Ring for more than $1 billion last week, and announced the formation of its own shipping service last month. Both of those moves were aimed at ensuring full control over the final stages of product delivery, so it only makes sense that Amazon would want more involvement in the purchasing stages as well.

There are a few advantages Amazon would gain from having its own payment system. First and foremost, the company might cut a deal so it wouldn’t lose money on transaction fees to other banking institutions. And importantly, Amazon could also accrue massive amounts of data by tracking how customers use their checking accounts, further helping the retail giant understand how best to encourage people to buy Amazon products.

One way to understand Amazon’s aggressive expansion is through a Darwinian theory called the “Red Queen Effect.” The theory posits that organisms are forced to continuously adapt and improve even when they are successful, because it has to be expected that other organisms will change. The effect is named for the Red Queen from Alice in Wonderland. “It takes all the running you can do to stay in the same place,” Alice says.

For Amazon, the same place is at the top, and that’s a pedestal that CEO Jeff Bezos seems determined to keep in his grasp. Instead of working to improve Amazon’s existing (and incredibly lucrative) infrastructure, Bezos reinvents and augments his company at an exhausting rate. So far, it appears to be working; he might even be banking on it.