Fintech entrepreneur Michael Zetser says Amazon’s move into the fintech market shows that the retail giant is broadening its horizons. He expects that this latest move is no coincidence since Amazon has decided to move into Latin America’s biggest economy to increase its eCommerce presence. This week, the company rolled out two Mastercard credit cards, one of which targets Prime users exclusively. Meanwhile, the other is available for non-members.
As many people are wondering what new feature it could deliver in the credit card space, Amazon explained its acquisition strategy. The aim is to offer new cashback rewards, as well as a buy now, pay later feature.
Currently, Michael expects it to work in a similar way as many other retail brand credit cards, but the only difference is the scalability since many people use Amazon. Cardholders will be able to earn points whenever they make a purchase on the platform or any other supported outlet. Then, they can redeem these points later on for discounts on new online purchases via Amazon’s online marketplace.
And according to Amazon’s Brazil country manager, these major benefits are the biggest in the country. Not to mention, they’re also permanent. News outlets have reported that Amazon issued over 14,000 cards in the first few days. To offer the card, Amazon partnered with card-issuing company, Bradescard. It’s owned by Banco Bradesco, which is one of Brazil’s two biggest private banks.
With this latest credit card addition, Amazon Brazil will offer more payment options, which currently include regular credit cards, bank slips, and Pix. In a recent press release, the company stated that it aims to offer users the most comprehensive payment experience and a growing range of reward options.
Last year, Amazon renewed its contract with JPMorgan & Chase for a similar credit card project in the US. Michael Zetser explains that the purpose of this card launch is to go up against local competitors. Specifically, Amazon wanted to offer similar functionalities as Mercado Libre, which is known as the Amazon of Latin America.
Even though Amazon is an undisputed market leader in all of America, it has faced immense competition from Mercado Libre, which is based in Buenos Aires. In fact, Amazon’s Argentinian rival has impressive fintech capabilities as well, with over 45 million customers in the South American region. So even though the new Amazon credit card is a new addition to the company’s strategies in Brazil, it’s no novel concept in the broader market.
Some competitors like Mercado Libre already offer credit card options for users’ online purchases. That being said, loans offered by online platforms have yet to increase at a steady rate. Recently, Mercado Libre reported a credit portfolio of around $3.3 billion, and this was up by 21 percent year over year. But despite the number seeming very large, it’s only a drop in the ocean representing Brazil’s massive loan market.
In an effort to win over customers, a core feature of Amazon’s credit card in Brazil is the buy now pay later option. For products worth around 3000 USD or over 1500 Brazilian reais, cardholders will be able to pay in up to 15 installments. And that too, without any interest or having to pay annual fees on the card.
In the current landscape, lower interest rates offer a firmer ground for people to expand their credit. And in Brazil, the central bank just recently cut its benchmark rate after an aggressive cycle of tightening monetary policy.
Michael Zetser entrepreneur explains that increasing rates of delinquencies have played a major role in digital banks pulling the breaks on lending. In fact, most financial institutions, which includes traditional banks, have reported major increases in defaults over the last few quarters. But as the interest rates go down, it’s likely that the financial health of Brazilian locals will improve.
In the US, Amazon offers a Prime Rewards Signature Visa card, which is backed by Chase Bank. Cardholders can use it at any store that accepts a Visa card and get a 5 percent cashback whenever they make a purchase on Amazon, Whole Foods, and Amazon Fresh. Additionally, they get rewards on other regular purchases.
Although there are various options available when it comes to retail credit cards, Michael Zetser expects this one to take hold. After all, Amazon is the biggest retailer out there, and many Americans make purchases from the company every year. Consequently, it definitely makes sense to get a card that rewards all purchases from a certain retailer. And the move will power growth for Amazon as well because it encourages users to make more purchases from Amazon.
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