Hacker News Reader

Comment by mabbo | Hacker News Reader

It's a clever business move for all involved.

Amazon skips the credit card fees. The businesses working with them probably don't have to pay Amazon the money for a few weeks, meaning they get to carry an interest-generating balance in the meantime.

If you don't spend all of the money you put on your account, then Amazon gets to hold that cash until you do, generating interest on the money held.

All the while, the customers who need this service get something they couldn't before- online shopping without a credit card, including the better selection and price competition that online shopping offers. (Yes, it's sometimes cheaper offline, but not always).

View on HN

Sounds like a check card at Bank of Amazon, that maybe isn't a "bank" because of loopholes in the banking law.

They don't need a loop-hole. This is basically a semi-closed stored-value card, which are a grey area between debit cards and closed stored-value cards (think gift cards).

https://en.wikipedia.org/wiki/Stored-value_card

Yeah, the wording in the FAQ has me a little confused:

2) Where can I use Amazon Cash?

We have partnered with thousands of stores across the country, including CVS Pharmacy®, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare Supermarkets, and VG's Grocery with more retailers coming soon. A directory of all participating stores can be found at www.amazon.com/cash.

Are they saying you can also spend your 'Amazon dollars' at those stores? Because then that definitely does sound like 'bank of Amazon'. It would be a logical way to get a slice of that sweet sweet payment intermediary industry pie.

EDIT: And it would put them in prime position to collect data on their competitors' retail transactions...

> Are they saying you can also spend your 'Amazon dollars' at those stores?

No, clearly not:

> 1) What is Amazon Cash? > Amazon Cash lets you add cash to your Amazon Balance [...] > Your Amazon Balance can be used to shop for millions of eligible physical products and digital content

OT: Kum & Go? Really???

I used to go to school near a gas station called "Pump-n-Munch"

If you can't use the money at, say, CVS, what benefit is this to them?

Amazon is selling a service that is sold at, say, CVS. And CVS makes a profit off of that service. CVS gets all of the cash, Amazon ends up with most, but not all, of it. Traditional credit card companies can charge somewhere in the realm of 1-3% or so on transactions, so imagine that CVS retains a similar or lesser cut.

Probably Amazon pays them 0-5% of the recharge amount. That's what they're saving on the credit card processing. Same as buying a Steam gift card at CVS or whatever.

That's pretty low for something that may be a strategically bad idea for CVS.

It would be a strategically bad idea if CVS did allow purchases with Amazon bucks. I'm assuming the FAQ is just badly worded, because I couldn't imagine CVS making such an awful strategic blunder. It would be bad for CVS because:

- Amazon would be able to see what CVS customers are buying, for what price and in what combination. That would make it pretty easy for Amazon to pick off CVS customers.

- If a large enough percentage of CVS' sales were settled in Amazon bucks, it would put Amazon in a position where they could 'tax' one of their bigger retail competitors by jacking up 'transaction processing' fees.

You really don't want to be reliant on a wholesale monopolist who also happens to be a retail competitor.

Yep, such an interesting 'innovation' in fintech.... I wonder who will come from the woodwork to oppose this?

Curious though; can you ELI5 who actually pays the interest?

---

I met a banker the other day and I asked him simply "how does one actually found a bank" his reply;

"Oh it's really simple, have $30,000,000 and you can create your own bank!"

Simple!

> Curious though; can you ELI5 who actually pays the interest?

ELI5: Lots of people have business ideas that can make money, but often they need to have a small pile of money in order to make more money. Let's imagine you are such a person. I lend you money to start your business, then your business makes lots of money, and you pay me back. That's a good deal for you, but not for me. Your business might not work out, and you might lose all my money. I'll still lend you the money, but I want you to pay me back more money since I took this risk for you.

That's where the money paid in interest comes from.

Similarly, you might replace 'start a business' with 'buy a house' or 'buy a car'. You don't have enough money to do so right now, but you know that your life will be improved by having these things, so you borrow money to do them. The people lending you the money won't do it for free.

Less ELI5: Alternatively, the businesses holding this money for four weeks will estimate what the lowest amount they'll be carrying over the next 5 years will be, then just go and invest that amount in stocks, bonds, etc. Since their balance will never fall below that amount, the money is effectively an interest-free loan from Amazon that they use to make interest-earning investments with.

DUDE.... +11 thank you what a wonderful explaination

I will come out of the woodwork to oppose it :-)

It is not really an innovation. This is basically private money that can only be used at a particular store.

At the dawn of industrial revolution large mills used to pay their workers with "scrip" -- a private type of cash that could only be used in company-owned stores. The company basically double-dipped: first profiting from the labor of the workers, then profiting from the mark-up on the goods and services "sold" to the workers.

Once you put money in Amazon cash, it goes to Amazon and nobody else. It is no longer "cash" or legal tender if you can't use it wherever you want.

My initial reaction, formed directly after readin "Amazon Cash" was similar to yours. This doesn't seem to be the devil I thought it would be though, since it's more analogous to gift cards than private scrip, IMO. Now, if you can use "Amazon Cash" in lieu of currency by, say, transferring it to other users at will, I'm right there with you - proprietary, private money is very creepy to me.

If you know unbanked people this is just an extension of the normal practice of buying Amazon gift cards at grocery stores and then using them.

Honestly I think that's most of the reason why Ralphs sells Google Play/iTunes/Best Buy/Amazon gift cards. People buy them with cash and then use them for themselves.

Yeah, its not the devil. It is more or less a "refillable" gift card. It would certainly be good for handling the occasional piggy-bank windfall (although a coinstar machine is better for that).

I worry, however, about financial products like this that get aimed at people who don't have bank accounts. They're a particularly vulnerable population.

Precieicyly what this target is. Simply a goal to fuck someone.

1) this isn't money you earn from Amazon...so they're not creating a closed amusement park style ecosystem where you HAVE to spend the money you make with them

2) you don't have to convert ALL of your cash into Amazon credit. You can allocate a portion that is useful to find cheaper/better selection of products on Amazon. They rest you can spend wherever/whenever you want

But isn't that how all gift cards work? If I buy someone a gift card to Target, Target has that money at the time I buy the gift card not when whoever I give the card to spends it.

Is this really any different then buying an Amazon gift card other then you can choose the amount to put on it?

True, but if you're going to use this, it would be easy to put together your purchase, use the barcode to add that much money to Amazon, then complete your purchase. Yes, it would probably be simpler over the long term to get a bank account or a credit card, but this is perfectly usable if someone is already planning not to do that.

This is a misplaced sentiment. If Amazon were trying to trap people into spending money at their store and forcing people to pay exorbitant Amazon prices, then maybe this argument would make sense. But Amazon has a wide selection of products at low prices. And they'd be willing to let people extract their money and go use it elsewhere if it weren't for the pesky problems related to money laundering. There's really no reason to assume amazon is acting in bad faith or against the interests of people using this service.

I agree with you completely, and I am going to put forth a totally unfounded conspiracy theory that popped in my mind, consider it just an exercise in fiction:

What if Amazon, with the fact that they built that huge CIA data center (think AWS for the CIA, plus the other contracts, plus the WAPO purchas...) is now doing an op to determine where grey money may be going and on what...

Think of it as a data op...

the infra to determine where monied intentions are going - it has nothing to to with terrorism, but everything to do with totalitarianism.

> can you ELI5 who actually pays the interest?

The bank that Amazon holds its money in.

> Simple!

Well, it is simple, it's a very straightforward method. Simple doesn't mean easy.

Yes I know someone who started a bank with some partners. I had the same surprise "What do you mean you can just start a bank if you want?". It is not as hot and happening as a startup, but it turned out pretty well. A lot of regulatory red tape though.

Reply on news.ycombinator.com