Amazon identity is the new Amazon money

The wonderful people at Gemalto invited me along to their Digital Banking Summit in Paris on a lovely June day to talk about the opportunities for banks in the burgeoning digital identity space. Perhaps it was psychological only, but I thought I detected more urgency in the air. If I were to hazard a guess, based on animal spirits and conversations over coffee, I’d say that it was because of the realisation that new kinds of competition around the corner.

Let me explain by beginning with a presentation that I unfortunately missed, because I arrived late at night. Patrick Gauthier from Amazon, someone I always take very seriously, was talking about the shift from wallets to identities. I took this to mean that whereas we currently thinking about loading payment products into wallets and then using them to purchase, in the future we will select our identity (e.g., work Dave, home Dave, hobby Dave) to interact with a service provider and then when it comes time for the payment, it will take place invisibly and seamlessly in the background. If you know who the counterparts are, payments are trivial.

By coincidence, on the same day as Patrick’s Paris talk, Amazon in the USA announced their new assault on the payments space.

"Through a new rewards program called Amazon Prime Reload, Prime members can receive 2 percent back on purchases when they first load funds into their Amazon Balance using a debit card attached to their bank’s checking account."

Amazon launches Prime Reload, offering 2% back on purchases funded through debit cards | TechCrunch

Now you can see why this bothers banks. I wrote before how banks in China are upset with Alipay not because they lose transaction fees, since these are heading towards zero anyway, but because they lose data. Under Amazon’s new scheme, all the bank will see is that you are loading your Amazon balance, in essence turning US dollars into Amazon dollars. The bank won’t see what you spend the money on or when you spend it.

I’m sure it is only a matter of time before those Amazon dollars are accepted by other merchants. Thus your “Amazon identity” is “Amazon money”.

Now, were I an Amazon Prime member in the USA then I would never use this, because I would continue to use the Amazon Visa card with 5% cashback. But you can see how it will be attractive to people who are uncomfortable with credit cards (or who don’t have one). But I can also see another use case