The COVID-19 crisis prompted an unprecedented surge in digital transformation, compelling businesses to execute swift implementation of digitization projects that enable Embedded Finance to emerge as a potent force. Lightyear Capital predicts the global embedded finance market to surge from €22.5 billion to €230 billion by 2025.
Echoing Bill Gates' prophecy, the financial industry is witnessing the realization of "banking without banks." Are we now glimpsing Bank 4.0 and the future of finance? In this article, we explore how Big-Tech Amazon is utilizing this lucrative opportunity.
Amazon Pay: Forging the Future of Finance
Amazon's dedication to "customer obsession" propels its expansion beyond e-commerce, notably succeeding in financial services. Launched in 2007, Amazon Pay facilitates purchases on external merchant sites with Amazon accounts, prioritizing reduced payment friction and superior user experiences. The platform ensures safety, speed, and convenience, offering multi-currency support, payment protection, and zero transaction fees for users. Evolving into a comprehensive financial ecosystem, it now features digital wallets, one-click payments, and instalment plans. Beyond revenue diversification, Amazon's embedded finance strategy solidifies its image as a reliable, user-friendly payment platform, boasting a 24% user share in the US. Amazon Pay, a pivotal diversification move, holds the key to future innovations in the embedded finance landscape.
Amazon Lending: Shaping the Future of Finance
Since its inception in 2011, Amazon Lending has steadfastly focused on facilitating financing access for U.S. small businesses, presenting a range of options such as term loans, business lines of credit, interest-only loans, and a cash advance program. In a significant move in November 2023, Amazon expanded its partnership to integrate Affirm as the first buy now/pay later option at checkout on Amazon Business. This integration enables small business owners to swiftly secure credit decisions by furnishing basic details like their registered business name and address. Offering customizable payment plans spanning three to 48 months and committed to transparent pricing, this endeavour aims to bolster more than 28 million U.S. sole proprietorships, elevating their purchasing capabilities, optimizing cash flow, and propelling growth. Providing loans allows Amazon to deepen its relationship with small businesses, creating a symbiotic connection where the success of these businesses contributes to Amazon's overall growth.
Amazon One: Transforming the Future of Finance
Amazon One redefines retail experience with its free, contactless service. Positioned as a potential central ID system, it spans various domains, including payments, loyalty programs, age verification, and integration with health records and corporate IDs. Available at over 500 Whole Foods and Amazon Fresh locations, Amazon One transcends retail boundaries. Panera Bread has embraced this technology, enabling customers to access their MyPanera loyalty accounts and pay with a simple hand wave. Moreover, at Coors Field in Colorado, patrons use Amazon One to verify they are 21 or older when purchasing alcoholic beverages. Amazon One's versatility extends across businesses, making it a diverse setting beyond traditional retail environments.
Amazon repeatedly innovates in embedded finance, addressing customers' financial needs directly. Leveraging customer personalization through Amazon Prime and Personalize, the success of Amazon Pay and Amazon Lending is undeniable. As these elements seamlessly converge, Amazon stands on the brink of potentially becoming the world's largest customer-centric retail bank through the full realization of its embedded financial platform, marking a transformative leap in the financial services landscape.
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