Amazon Cash app will allow millions of unbanked consumers to shop Amazon.com

Amazon is not the first retailer to try and woo 17 million unbanked U.S. consumers to shop online. But, the Seattle-based e-tailer recently launched Amazon Cash in conjunction with brick and mortar retail partners such as CVS Pharmacy and Kum & Go that allows consumers to upload money to their Amazon account via a smartphone at participating retailers.

Amazon recently launched the new cash service similar to PayPal My Cash previously offered without the $3.95 added fee. The minimum cash upload is $15 and the maximum is $500 in a single transaction, according to Amazon. While the service will most likely be accessed with a smartphone, paper printouts are acceptable. Amazon said the bar code received from Amazon Cash can be printed out from a laptop or desktop and that piece of paper can be taken to the participating store and scanned into the system, if the consumer doesn’t have a smartphone.

The Federal Deposit Insurance Corp., estimates that around 27% of consumers are underbanked or unbanked entirely, in that they are largely a pay-with-cash demographic. The FDIC said around 17 million U.S. consumers have no bank account and another 51 million don’t regularly use a bank account. Online retailers have long tried to reach this demographic with tactics such as selling prepaid debit cards in their stores which can used to shop online. Wal-Mart Stores took that one step further in recent years when it began allowing customers to order online and choose a pay- in-cash option. The customer then has 48 hours to take the cash to the store before the order is filled.

Amazon Cash sits in the customer’s online account and can be used to shop online, or access media. In the past a shopper would have had to purchase an Amazon gift card now they have the money on deposit with Amazon.

CVS Pharmacy and Kum & Go convenience stores are two Amazon retail partners with locations in Arkansas. In other states Speedway, Sheetz, Family Fare, D.W. Fresh, and VG’s Grocery are participating in the Amazon Cash program. Amazon said it will add more retailers to its approved list.

Jefferies equity analyst Bret Jordan said Amazon Cash eliminates a barrier for cash-only households, but he doesn’t expect significant market share growth for Amazon with because there are “friction” points in that customers have to go to a participating retailer and then upload the cash into their account. Because cash-only customers are focused on price, Jordan also doesn’t expect those who do use the service to become Prime members given the costs and that will mean higher shipping costs for them. Jefferies estimates Amazon might pull 20% of the cash-only households by offering this program.

RetailWire asked retail insiders if this move by Amazon is a threat to its competitors and what they expect the impact to be on the retail competition. Results found that 73% of the respondents said this demographic is “somewhat likely” to use Amazon Cash, and 13% believed Amazon Cash would “very likely” draw in significant numbers of the underbanked and unbanked demographic. About 14% of respondents think it’s more unlikely to happen.

Most analysts don’t think Amazon Cash will disrupt Walmart’s apple cart given the retailer already has a cash shopping option for its online customers. Morgan Stanley analyst James Faucette, notes that it’s PayPal likely to feel the brunt of this new service.

“Ultimately, we do not view this announcement as a needle mover for Amazon, but it would somewhat diminish the value of PayPal to them,” Faucette said.

Several retail experts believe the move by Amazon will be well received by Millennials and Generation Z, but it may not be that big of deal overall. Steve Montgomery, president of B2B Solutions, said this unbanked demographic has had a number of options for several years that allow them to shop online. He said prepaid visa cards don’t limit them to one retailer. Montgomery said this will add some incremental sales to Amazon, but he doesn’t see it as a huge win.