Podcasts

Tradestreaming Deep Dive: Amazon and Capital One?

  • TS's Tanaya Macheel wrote a contrarian piece on why a potential Amazon acquisition of Capital One actually makes sense.
  • She joins us on the podcast for a deep dive into the story.
close

Email a Friend

Today’s episode is part of a new series we’re running. It’s called Deep Dive and as part of the show, we get an inside look from the reporters writing some of our top stories. From our New York office, reporter Tanaya Macheel joins me on the podcast to discuss the rumors that Amazon was in talks to acquire Capital One. Most of the articles that covered the story focused on why the deal didn’t make sense. Tanaya took the opposite tack with a contrarian piece on why the deal isn’t as crazy as it first sounds.

Subscribe: iTunes I SoundCloud

Below are highlights, edited for clarity, from the episode.

Why would a tech firm want a bank?
Let’s start by saying that this deal is unlikely to happen. Banks were formed to manage dollars and cents. But as they’re undergoing this digital overhaul, like every industry is, they’re now managing data. All customer digital transactions and history are data which tech companies are really good at managing.

Are customers open to banking with Amazon?
I’m one of those people who is a little more wary of sharing my data with tech companies. There’s research that shows that 20 percent of people polled would buy financial and insurance products from large tech firms. Those findings aren’t that surprising given what I said before about banks moving into managing data.

Customers expect banks to keep up with the pace of innovation that technology firms set. 37 percent of people polled said they would be willing to leave their bank if it wasn’t keeping up.

Why is Amazon interested in Capital One?
We’ve seen payment plays from the other big tech firms, but Amazon is the only big tech firm that needs payments as part of its core business. Most of Capital One’s business is in credit and lending. While traditional banks focus on borrowers with high FICO scores, Capital One has opened up lending to almost anyone with an unsecured loan.

Amazon also offers a branded credit card that is issued by Chase. Capital One is also a card issuer and if Amazon could bring that under its own umbrella, it would earn more money.

Lastly, Capital One knows how to get new customers by marketing the right product to the right person at the right time. Customer acquisition is one of the biggest challenges for credit cards. It’s so expensive and can cost credit card issuers up to $800 to land a new account. With the data each company has, they can provide potential borrowers with better targeted offers and reduce acquisition costs.

What does a potential Amazon-Capital One acquisition look like for customers?
When you enter the checkout process now, you get all these payment offers. You can use credit cards and PayPal. You can also use PayPal Credit, which used to be called BillMeLater. There’s also this great company called Affirm, founded by PayPal’s Max Levchin. It’s a digital installment startup that directs you to apply for a no-interest or low-interest credit option. Because this is kind of core to Capital One’s business, that’s how I can see it manifesting.

What could get in the way of the deal?
Capital One has 800 branches and may need to sell off some of the consumer business to make the deal more attractive. Vantiv does Capital One’s merchant acquisition and Capital One would need to deal with that before doing a deal with Amazon. There’s also some lingering regulatory things that need to get cleaned up.

0 comments on “Tradestreaming Deep Dive: Amazon and Capital One?”

New banks, Podcasts

Truist Ventures wants to bring ‘surprise and delight’ to financial services through its investments

  • In the wake of the merger of BB&T with SunTrust Bank, Truist was formed.
  • Truist Ventures is the 'tip of the speak' of the new FI's approach to innovation.
Zachary Miller | January 25, 2022
Online Lenders, Podcasts

‘The conversation in most bank boardrooms now is can we digitize fast enough?’: Numerated’s Dan O’Malley

  • Numerated is a digital lending platform used by banks to issue credit to SMB customers.
  • On the back of an acquisition of Fincura, Numerated CEO Dan O'Malley joins us on the podcast to discuss the future of SMB lending.
Zachary Miller | January 20, 2022
Podcasts, Sponsored

‘What fintechs have done right is understanding who their customer is, and building for them’: BlueVine’s Herman Man

  • There are 30 millions SMBs, and they create two thirds of the jobs in the US economy – who’s building for them?
  • BlueVine’s CPO Herman Man joins us on the Tearsheet Podcast to talk about the importance of customer-product fit, and what’s next for digital-first banking solutions and the fintech ecosystem.
BlueVine | January 19, 2022
Finance Everywhere, Podcasts

‘It’s a lot more fun battling over 150 basis points than 10 basis points’: Tern’s Brion Bonkowski

  • Tern is an embedded finance platform run by Brion Bonkowski.
  • He joins us on the podcast to discuss the platform's roots in cross border debit payments and where the platform is headed in the future.
Zachary Miller | January 12, 2022
Podcasts

Behind Green Dot’s embedded finance business with Amit Parikh

  • Green Dot has its hands in a few different businesses, including an embedded finance platform.
  • The firm's Amit Parikh, who heads up the banking as a service group, joins us to talk shop.
Zachary Miller | January 05, 2022
More Articles