Interview Questions › Product Strategy

Should Amazon launch a traditional bank?

Amazon has merchant lending, consumer credit cards (partnered with Chase), and Amazon Pay. Evaluate whether Amazon should apply for a full national banking charter to operate as a full-fledged commercial bank.

Context

Holding a national bank charter allows accepting consumer deposits and lower cost of capital, but triggers heavy regulatory oversight (Fed, FDIC, OCC, Dodd-Frank, capital reserve ratios).

Clarifying questions to ask first

• Would the bank offer consumer checking/savings accounts or strictly merchant business banking?
• What are the capital reserve requirements under current banking regulations?

How to approach it

1. Analyze Strategic Benefits: Direct low-cost deposit funding for merchant loans, elimination of interchange card processing fees ($10B+ annual savings), deep customer financial telemetry
2. Analyze Strategic Risks & Burdens: Stringent regulatory compliance, mandatory separation of banking and commercial commerce, capital adequacy reserves locking up cash, public and political antitrust scrutiny
3. Evaluate Embedded Finance Alternatives: Partnering with chartered sponsor banks (Banking-as-a-Service) vs Owning the charter
4. Provide a definitive Go / No-Go Strategic Verdict

Framework: Strategic Objectives -> Charter Ownership Pros/Cons -> Embedded Finance Alternative -> Regulatory & Political Risk Assessment -> Strategic Decision

Sample answer

• Applying for a bank charter would invite massive antitrust scrutiny and subject all of Amazon's tech operations to federal banking regulators
• Amazon can achieve 90% of the financial upside through "Embedded Finance" partnerships (e.g. co-branded cards with Chase, merchant loans with Affirm/Goldman) without regulatory liabilities
• Becoming a regulated utility bank limits operational agility and growth multiples

1. Financial comparison: Compliance and capital reserves cost ~$2-3B annually and restrict cash flow; BaaS partner model yields 80% fee savings with zero balance sheet regulatory risk

Recommendation: DECISIVE NO-GO on a banking charter. Pursue aggressive "Embedded Finance" by partnering with chartered banks for consumer checking and merchant credit, capturing fintech value while keeping regulators at bay.

What interviewers look for

• Banking Charter Regulatory Burdens vs Benefits
• Capital Efficiency & Reserve Requirements
• Interchange Cost Elimination vs Compliance Cost
• Embedded Finance Partner Alternative