Jeff Bezos, CEO of Amazon
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Amazon’s interest in banking is among the biggest challenges facing the banking industry. On Monday, the challenge got a little more real.

The Wall Street Journal reported that the online retail giant is in early discussions with banks, including JPMorgan Chase and Capital One, about partnering to offer its customers a checking account product or something similar.

Shipping, streaming, checking

The WSJ emphasized that Amazon’s checking initiative is still in the very early stages, so it’s unclear what final shape it would take, except that the product would be marketed to younger consumers without bank accounts.

Amazon checking may take the form of an affinity-style relationship similar to those routinely offered by banks and other companies. Or it could mirror the neobank business, where neobanks offer the front-end experience and chartered banks hold the deposits in the background.

One scenario, analysts suggest, is that Amazon would offer a checking account as part of its popular Amazon Prime subscription service, which is priced at $99 a year.

That would be a game changer for the concept of free checking, says Ron Shevlin, director of research at Cornerstone Advisors.

“Packaging a checking account with Prime would flip the model on its head,” Shevlin says. “Historically, banks have tried to use checking accounts as the core of their business. In this case, checking would be part of a bigger bundle.”

Banks offer free checking — even if they make you jump through hoops to avoid a monthly fee — because it is viewed as the nucleus of the relationship. It’s typically sold as a loss leader that gets customers in the door to see other more profitable products.

For Amazon, checking would just be another perk, alongside free shipping and a streaming video service.

If you can’t beat ‘em, join ‘em

The banking industry is obsessed with the question of when Amazon and the other tech giants could begin competing with them. The banks are worried that their role as brands could be diminished, leaving them to take care of the plumbing.

Uber is a prime example of their worst fears. One of Uber’s major conveniences is its seamless payment mechanism. Users’ bank or credit card accounts are at the center of the experience, however all of users’ positive associations are with Uber.

Speaking of positive associations — older millennials already have them with Amazon. Cornerstone’s research recently found that 73 percent of older millennials would be willing to use an Amazon debit card as their primary or occasional payment card.

That makes JPMorgan’s potential role in this all the more interesting. In recent years, the company has been open to striking partnerships with companies that could disrupt its status quo in various business lines in order to stay relevant in the digital age.

The bank’s partnership with TrueCar is a good example. TrueCar’s platform offers a seamless, end-to-end car shopping experience that could compete with JPMorgan Chase’s indirect auto lending business, but the bank has chosen instead to adapt TrueCar’s platform. It is also pairing up with Berkshire Hathaway and Amazon to tackle health care. The checking deal with Amazon could replicate these earlier collaborations.

“Maybe they are wondering, ‘What else can we do together? Let’s come up with some other newfangled ways of addressing consumer challenges,’” says Jacob Jegher, senior vice president of banking at Javelin Strategy & Research. “Banking is one of these major consumer challenges.”

It’s also not surprising that Capital One’s name is on the list of potential partners. Based in McLean, Va., the bank has been an evangelist for using Amazon Web Services cloud computing platform to run its business. Capital One was also one of the first banks to allow customers to handle transactions on Amazon’s Alexa-controlled products.

“The exciting part of this for me is that we have banks and technology companies talking about partnerships that could take the industry to new heights,” Jegher says. “But I bet plenty of other banks could be scared of this type of collaboration.”

Amazon needs the banks

Quite frankly, being a bank is tough. Even in an age of deregulation, banks and bank holding companies are under intense scrutiny. It’s unlikely that Amazon would want to directly subject itself to such scrutiny by getting into the banking business directly, either by starting a bank or buying a bank. It would rather play around the edges of financial services than dive in directly.

And don’t forget the banking lobby. Organizations like the American Bankers Association and the Independent Community Bankers of America rallied aggressively to keep Walmart from obtaining a banking charter a little over a decade ago. Amazon should expect a similar battle if it pursued a bank charter outright.

Do I want an Amazon checking account?

Let’s ask the question another way. Do you like it when Amazon suggests products to you? Do you find value in Amazon knowing how to perfectly anticipate your taste in books or clothes?

If the answer to these questions is yes, then you’d probably like an Amazon checking account. Essentially, Amazon is in the data business, and having access to how you spend your money would give it tremendous insights into who you are and what you want.

“Amazon would like to be at the center of consumer experience, and what they are really after is data,” Jegher says.

When it comes to data, banks have been decidedly more subdued. They just haven’t done a great job leveraging the data they have to offer you stuff. They are getting better, but they still have a ways to go.

The other element, however, is restraint. The general mood has been that consumers love it when companies like Amazon suggest a product, but get a little creeped out when their bank does it, Jegher says. Too much Big Brother.

Amazon’s foray into managing your day-to-day spending would certainly test just how comfortable consumers are with companies using their banking information to sell them stuff, regardless whether it is a loan or a book.