It’s designed to increase enrollment in Amazon Prime, the $99 per year membership program that provides discounts and access to a range of goods and services, including video streaming and two-day shipping. Prime Reload focuses on treating an Amazon account as a stored value account to decrease purchase friction and to reduce transaction costs.
After enrolling a debit card and bank account (Amazon chooses which to use when processing reloads), the next step in the process is to load value to the shopper's Amazon Balance with a $100 load set as the default and emphasised in bold. The 2% cash back is not provided at the time of purchase, but at the time of reload.
Amazon is subtly guiding the end user to load at least $100 to the account for and to burn through this to earn rewards. Psychologically, it is also abstracting the funds from traditional payment media, presumably to make the value stored by Amazon “fun money”, rather than a value that is coming directly from the weekly budget. Its use of the phrase “Gift Card Balance” is somewhat telling - this money is a gift, it just happens to come from yourself.
The launch of Amazon Prime Reload will not be welcome news to card networks, issuers and traditional retailers.
The banks and card networks fought relentlessly with PayPal over the years against its use of a similar practice of using linked bank accounts to cut its own payment costs. Visa and its peers finally convinced PayPal to change its ways, but it seems now that this battle was fought on the wrong front.
If Amazon succeeds in convincing shoppers to use their Amazon Balance instead of a payment card, issuer revenues from Amazon will dip dramatically as the retailer shifts more reload volume to ACH.