Amazon on Monday announced a new service catering to people who can’t or choose not to use credit cards or bank accounts, the e-commerce giant told Retail Dive in an email. In contrast to increasingly popular prepaid credit cards, Amazon Cash carries no fees.
The new service allows shoppers to add between $15 and $500 in cash to their Amazon Balance at more than 10,000 retail stores nationwide; participating retailers include CVS Pharmacy, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare and VG’s Grocery, and the list continues to grow every month, according to Amazon.
The process involves a barcode, which shoppers can request via mobile or the Amazon website, and that can be scanned at a participating retailer to convert the cash, check or Amazon gift card balance to the Amazon balance for shopping on Amazon as well as its marketplace.
While “financial inclusion,” or access to bank accounts is often only thought of as an issue in low-income countries, it’s prevalent in the United States too. A 2015 survey from the Federal Deposit Insurance Association (the independent agency created by Congress to insure bank deposits, supervise financial institutions and otherwise maintain stability and public confidence in the nation's financial system) found that 7% of U.S. households, some 9 million, were unbanked — meaning they had no checking or savings account. An additional 19.9% or 24.5 million households were underbanked — meaning they had a checking or savings account but also obtained financial products and services outside of the banking system, through payday loans, pawn shops, check-cashing services, prepaid credit cards and other means.
Most unbanked Americans (57.5%) are in that situation because of financial circumstances, though about a third choose to be because they don’t trust the banking system. Nearly a third of underbanked consumers (30.8%) say it’s because of high or unpredictable fees, according to the FDIC. Wal-Mart Stores Inc. has traditionally served such consumers with services like paying for online purchases with cash in stores and even some banking services.
PayPal and Wal-Mart, which also have online cash services, are likely to be disrupted by Amazon’s play. Wal-Mart and its new Jet e-commerce operations are increasingly going head to head with Amazon, and the new cash program is poised to attract many core Wal-Mart shoppers.
Notably, Amazon Cash is not one of the many services reserved for Prime members, which tend to be wealthier consumers willing and able to pony up $99 each year for that program's perks. Amazon recently met a challenge from Wal-Mart, which ended its Shipping Pass membership program and replaced it with a $35 free shipping minimum for all shoppers, by lowering its own non-Prime free shipping minimum to $35. These moves suggest that Amazon isn't willing to cede its non-Prime shopping customers to Wal-Mart's recently assertive e-commerce moves.