The launch of Amazon.com Inc.’s Kindle Fire in late September stoked the flames of the tablet war raging among providers such as Hewlett-Packard Co., Apple Inc., Research in Motion Inc. and Amazon Inc.
But besides being a place to access online banking, older, ad-supported versions of the Kindle provide an advertising platform for banks. During the fanfare around the Fire, Jeff Bezos, Amazon chief executive, also announced the Kindle, Kindle Touch and Kindle Touch 3G all will be ad-supported.
In April, Visa Inc. and JPMorgan Chase were two early sponsors of a feature called AdMash, which enables consumers to set which advertisement the cheapest version of the Kindle switched to when it shifted to screen-saver mode.
“We basically create a stream of messaging that is highly relevant to this population as they consider the Kindle, either in the act of purchasing it, and when they have the device,” says Chris Conrad, Chase marketing director in charge of Amazon rewards card.
Chase would not say how much money it has spent on Kindle advertising. Visa did not make anyone available immediately for comment.
In a bid to make its own payment mechanism more relevant, Chase has also made it simpler for its Amazon rewards cardholders to redeem points. They currently get 3 points for $1 they spend, with 100 points equaling $1, and they can spend those points immediately on the card. They previously had to accrue 2,500 points and then had to wait for a physical gift card by mail.
“We think there are additional opportunities to talk about digital content and how rewards apply to this,” says Conrad. “It is a new way to talk to individuals with a high degree of interest in Amazon,” he says.
Banks potentially could engage with Amazon in the realm of noncard, mobile and online payments. Besides books, magazines and newspapers, the Fire, which runs on Google’s Android operating system but uses a browser called Silk, which Amazon designed, provides access to expanded content, including video and music as well as all the other merchandise Amazon sells online.
In contrast to Apple, which takes a cut of revenue for things like magazine subscriptions sold through its iTunes store, experts say that Amazon operates more like a newsstand, and will give banks a chance to engage more directly with consumers.
But there is a potential downside to bank and card providers of the growing popularity of tablets like the Kindle. As customers, and particularly younger consumers, grow more comfortable paying for merchandise and services online with alternative forms of payments such as those offered by PayPal Inc., or person-to-person transactions from a variety of providers, banks run the risk of disintermediation, says Kevin Travis, partner for Novantas LLC in New York.
Although Amazon does not accept PayPal to pay for goods and services, mobile-device users have expressed a willingness to use alternative payments.
Banks hold the funds of the alternative payment providers, but they do so in more costly commercial accounts.
“It could increase the cost [of holding the cash] fundamentally, and further exacerbate the revenue pressure retail banks are under,” Travis says.
