Amazon’s Prime Increase Gives Them $2 billion To Invest In Mortgage

“There are two kinds of retailers. There are those folks who work to figure how to charge more, and companies that work to figure how to charge less, and we are going to be the second.”

— Amazon CEO Jeff Bezos, on a 2001 quarterly earnings call

This quote was referenced in a Bloomberg piece last week by Brad Stone—who literally wrote the book on Amazon—after they raised Prime’s annual fee by $20. Sure that’s only “5 Grande Lattes a year” according to RBC’s Mark Mahaney, but Stone brought it up to discuss not how much Prime increased, but why.

He concluded it’s both because they can and must—to invest in things like better entertainment offerings, new fulfillment centers to to hold off Walmart, and absorbing Whole Foods delivery costs. But he left out one giant Amazon vision where part of that newfound $2 billion will enable them to charge less: consumer finance.

They’ve started checking accounts. The just pushed further into real estate. And Amazon Mortgage rumors continue swirling at the same time mortgage lenders are under extreme margin pressure and trying to figure out how to charge more. It’s a normal part of the extremely cyclical mortgage business, but 2018’s rate spike combined with huge technology investments most lenders are making has made this year tougher than past cycles.

Meanwhile Amazon will continue trying to figure out how to charge less. I predict no-fee mortgages at lower rates in any Amazon loan play. There’s already been lots of industry chatter about how “mortgage is different” and “Amazon will find out that you can’t just change prices.”

Wrong.

Stone’s book is about how Amazon came up through each industry they disrupted over the past 2.5 decades, and they straight up DGAF about existing industry structures. If/when they enter mortgage, they will just change prices, and they will live up to Bezos’ 2001 “charge less” decree.

Next time, I’ll comment about how Amazon would impact mortgage industry market share.