There was a thread doing the rounds on Twitter yesterday that went something along the lines of: 2018: Amazon buys a supermarket chain, 2019: Amazon buys a bank, 2024: Amazon buys a hospital chain, 2028: Amazon buys an entire city…. And so on, you get the drift. What’s exciting, and scary, is the fact that it’s entirely possible that Amazon could do any, or all of these things.
News that Amazon’s Jeff Bezos is “in talks” with several large banking entities, among them JPMorgan Chase and Capital One, came from The Wall Street Journal, which said the e-commerce giant was looking at launching an Amazon-branded current account.
The idea seems to be to tap into the millennial audience and effectively bypass the traditional banking system. The banking sector appeared to take the prospect of Amazon entering the fray in its stride and commentators said that’s probably because a tie-up with one or more existing banks is more likely than Amazon trying to forge its own path in such a highly regulated sector.
However, Amazon is clearly not afraid to step- both feet first - into new territory. Already long gone are the days when it was ‘only’ an e-commerce business. Today it has a bricks and mortar presence in retail with its owns stores and last year’s acquisition of the Whole Foods chain.
And it hasn’t stopped there. It’s also now such a contender in media that Sky has brought rival Netflix into the Sky offering, as something of a defensive measure, as it goes head-to-head with Amazon Prime TV and its video streaming service.
Perhaps even more crucial though is Amazon’s partnership with JPMorgan Chase and Warren Buffett’s Berkshire Hathaway, announced late in January, in a bid to enter the US healthcare insurance business, which is arguably ripe for disruption.
What could be more telling here is that Warren Buffett is a big fan of the banking sector. As well as having scandal-ridden Wells Fargo as a major holding, he holds large stakes in Bank of America, BNY Mellon and American Express, among others.
With Buffett on board potentially, coupled with a growing allegiance with JPMorgan and the trust of the millennial audience, who in a recent US retail banking survey1, said they were most likely to trust payPal and Amazon with their money, Amazon may be about to morph from e-commerce giant to global behemoth, with ease.
Amazon’s power to disrupt markets and continually grow its business provides both a threat as well as an opportunity for investors. One such believer in Amazon’s potential is James Thomson, manager of the Rathbone Global Opportunities Fund, which has Amazon as his second-largest holding. The fund is on the Fidelity Select 50 list of recommended funds.
Source: 1 Bain/Research Now Customer Loyalty in Retail Banking Survey, 2017
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