Amazon Cash: A Way Towards Cardless Payments

by Sean Ogino |

Amazon Cash: A Way Towards Cardless Payments

A broken online shopping experience is a real killjoy for e-commerce operators as well as shoppers. Studies have shown that tricky, complicated, and inconvenient payment options can be a deal breaker for an online shopping experience. It has been observed that 8% have abandoned the cart as they felt that there were not enough payment methods. Amazon has decided to respond to this rising alarm of inefficient payment modes. Lat week, it announced the launch of Amazon Cash to reduce the need of card payments by opening a channel for customers to pay with cash.

This free service lets shoppers who are credit card-adverse pay online through a simple process. Customers will have to go the Amazon Cash site and press “Get your barcode,” which they can receive via text or print out at home. Customers then will have to present the barcode at a participating retailer — which includes CVS, Sheetz, and Speedway. Once at the store, customers will have to show the cashier the barcode to scan and pay the amount they want to be added to their Amazon balance in cash. With the Amazon gift card, which gets added to their account, customers can purchase items on Customers can add between $15 and $500 in a single Amazon Cash transaction; daily limits vary by retailer. This cash will get applied immediately to their online Amazon account.

Besides, as a promotion through May 31, Amazon is offering a $10 free digital credit to those who add at least $50 to their Amazon Balance. It’s important to note that customers won’t be allowed to withdraw the cash from their balance. All these activities can be tracked through the individual accounts of customers. The following image will help you in grasping this functionality.

amazon cash

The Reasoning for Amazon Cash

A little observation is enough to conclude that neither the functionality nor the conceptualization of Amazon Cash is a maverick innovation. PayPal has the My Paypal Cash card, which has a similar partnership with retailers that enables its customers to make cash payments on multiple sites. Even Amazon’s competitor, Wal-Mart, has launched a Pay with Cash initiative for online purchases back in 2012.

The secret why almost everyone in the online business domain is opting for generating this cardless payment framework is in the insights. According to a 2014 survey by Princeton Survey Research Associates International, 63% of the 1,000 millennials polled are living without credit cards. The total population of card-free Americans is likely well below 25%. Further insights tell that 7% (9 million) and 19.5% (24.5 million) of U.S. households were unbanked and underbanked, respectively, in 2015. It also found that 62.5% of unbanked households used cash to make purchases. Looking at such data, it’s not surprising to see that Amazon wants to use its Amazon Cash as a tool to reach people who don’t have bank accounts and cards. Of course, it also aims to target the set of people who don’t want to use their debit or credit cards while shopping online due to security purposes.

Even though for time being Amazon Cash is currently available for Americans only, Amazon can think about expanding it in emerging economies where digitalized payments are still not a norm. Amazon’s recent launch of its Prime services in Mexico, where only 44% of adults have a bank account, is a sign that it has already made a move in that direction. And Mexico is not alone. India has more than 165 million unbanked citizens. The situation of Southeast Asian countries is more or less similar.

Another important point to consider here is that Amazon has tried to run promotional campaigns and offered free Prime membership to low-income households to get a grip over that demographic segment. It has seen positive results too. Baird analyst Colin Sebastian wrote that Amazon Prime membership is increasing “fastest among lower-income householders, which should drive continued incremental share gains at the expense of more discount-oriented retailers”. Amazon Cash can further tighten this hold over the low-income group by giving it an easy payment option.

Concerns with Amazon Cash

Though everything about Amazon Cash looks picture perfect, some concerns make their presence felt. The first point is, about 28% of unbanked customers said they don’t trust banks while a similar number said avoiding a bank gives them more privacy. Now, it’s very difficult to find out how those who don’t trust banks would want to give the online retailer the personal information required to open an Amazon account.

The second point is that it’s simply not that troublesome to buy an Amazon gift card and then type in the numbers to add it to your account. It’s true that Amazon Cash is a new way to pay that some consumers may find more convenient. But it looks like a lot of effort for Amazon to come up with a way to shake the last nickel out of the pockets of customers who were slightly outside its reach. If it doesn’t get translated into sales, Amazon Cash may turn out to be a solution which was created to solve a problem that didn’t really exist!

[White Paper]
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