Amazon cuts its own costs
On the surface, Amazon's loyalty cashback program, Amazon Prime Reload
, appears to be just another benefit of enrollment in Amazon Prime, the $99 annual membership program that provides discounts and access to a range of goods and services.
However, a deeper dive into the workings of the program — which offers 2% cash back when shoppers use a debit card or bank account to load an Amazon stored-value account — should give the card payments industry serious cause for concern.
Since its launch in 2005, Amazon Prime has become the hub of the online retailer’s customer acquisition strategy. To continue growing, Amazon Prime needs to broaden its appeal to a wider audience, and its January 2017 move to offer better rewards to Amazon-branded credit cardholders
doesn't come close to accomplishing this.
Newer programs like Amazon Cash
, a service that allows cash loading to an Amazon account at participating retailers, have set the stage for the debit and ACH-focused Amazon Prime Reload. Both of those programs cater to consumers who prefer cash and debit over credit. This strategy extends to mobile payments through Amazon's growing retail presence. Its cashierless Amazon Go stores, for example, require people to have an Amazon account to enter and shop.
Exploring the inner workings of Amazon Prime Reload provides some revelations on Amazon’s plans for the service, which debuted in mid-2017.
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 emphasized 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 and to burn through this to earn rewards. Through this model, card networks and issuers not only lose revenue and brand recognition, but also lose transparency on consumer transaction behavior, shifting the balance of power in terms of customer data analytics back to Amazon.