Amazon has had a fantastic 2020 with its share price at the beginning of January rising from $1,898 to over $3,531 in September enabling it to join the exclusive club of companies that are valued at over $1.5trillion, yet incredibly despite its success it is still not one of the 15 in the S&P 500 that is net cash positive. Given its internet sales it has also awoken, the retail’s giant, Walmart who saw its on-line turnover rise by 97% last quarter . However, last year Amazon generated revenue of $280 billion and in its latest quarterly results reported $89+billion of revenue, of which $10 billion was from Amazon Web Services (AWS), another $10billion from advertisers both of which is generated from corporate clients. Much of the remaining $69billion turnover was from individuals shopping on-line so just think of all those bank charges and credit card fees that could be saved if Amazon used its own digital currency. As a rough guide if one assumed that it costs Amazon 1.25% to process payments i.e. card fees and we assume that only 33% of the $69 billion last quarter used an Amazon coin that could result in boosting Amazon’s profit by $280million. Over a year that would be an additional $1.1billion of profit which equals over 5% increase in profits and that ignores any savings in FX fees as it transfers money globally buying goods and services or paying its 647,000 staff.
However, in order for Amazon to issue its own digital currency surely it needs some technology. Well fortunately Amazon have been securing patents for a number of years around Blockchain technology. Such as back in 2018 its patent to be able to track crypto currency transactions or its proof of works patent it filled in May 2019 , which could be very helpful to assist any digital currency ambitions it harbours.
More recently Amazon have announced that drivers in the USA will be able to use Alexa to pay for fuel for their cars as they drive into gas/petrol stations. This 2 min video shows the convenience, although some may say the how Amazon is tracking and monitoring its customers, as this may feel a little like - ‘Big Brother”.
In order for Amazon to keep enjoying the growth in profits it has been it will need to target other sectors of the economy. According to Deloitte the Financial sector accounts for 21% of US GDP. Having its own payment mechanism i.e.an Amazon coin could be a may that it makes greater inroads to financial services. Amazon already own ‘Amazon coin’ so surely it is a matter of if not when and no doubt this will spur on other global multinationals to follow as after all having their own digital currency enables corporations to exert more control over its suppliers and offers them even greater access in to the massive financial services sector along with its tempting profits!