Amazon Prime Gets Students Discount on Wells Fargo Loans
Amazon (AMZN) - Get Report is continuing to expand its reach, announcing that it will team with Wells Fargo (WFC) - Get Report to offer discounted student loan interest rates for Amazon Prime Student members.
Students signed up for Amazon's membership service will be eligible for a 0.5% discount on newly originated or refinanced student loans from Wells Fargo. That discount will also work in conjunction with the 0.25% discount that students who sign up for automatic payments also receive from Wells Fargo.
While the move may seem out of Amazon's purview at first blush, the online retailer has made a habit in recent years of expanding its reach in unexpected ways.
Amazon is a key holding of the Growth Seeker portfolio.
"Expanding their web (no pun intended) much like Costco and other companies have. Levering the power/size of the Prime customer base, including student customers, to make offer deals that on its face add value to having, and in Amazon's case new members/subscribers getting, Prime membership. Nothing really shocking and in many respects it logically follows Amazon Payments," said Growth Seeker co-manager Chris Versace in an email exchange.
The move could also be a boon for Action Alerts PLUS holding Wells Fargo, which may have the opportunity to have access to the detailed payment information Amazon collects from its Prime members.
"The move is consistent with Wells' strategy to become more involved in the digital space and to keep pace with appealing to millennial consumers. Along with its recent moves into the digital/mobile payments space, this move will further its reach and allure for the younger demographic," said Action Alerts PLUS senior analyst Scott Berman in an email. "Essentially, a marketing opportunity for the bank. And who better to partner with than Amazon, the company that is seemingly a one-stop shop for anything and everything."
Meanwhile, the partnership is low-risk for Amazon, since Wells Fargo will still be handling all the financial aspects of the partnership. However, the timing of the partnership, announced Thursday, comes at a time when the loan industry is at a crossroads.
This year, former Democratic presidential candidate Bernie Sanders staked much of his run on the idea that college tuition should be free for American citizens. It was a message that resonated with both students and their parents as college tuition continues to increase annually at a rate of 3.7% for private institutions and 2.9% for public ones, according to The College Board.
That message was adopted by presumptive Democratic nominee Hillary Clinton, whose campaign earlier this month debuted its plan to eliminate in-state college tuition for families making up to $125,000 annually.
On the other side of the aisle, the official Republican platform released Thursday states that, "The federal government should not be in the business of originating student loans. In order to bring down college costs and give students access to a multitude of financing options, private sector participation in student financing should be restored," according to the Brookings Institute.
So no matter who wins this the presidential election in November, the way U.S. families pay for student loans could see some dramatic changes.
Amazon, meanwhile, is less concerned with the politics surrounding the marketplace than the marketing of its Prime Student membership itself. But Versace doesn't see this partnership moving Amazon's bottom line significantly.
"Odds are it isn't going to move the needle much from a revenue and EPS perspective. The upside for Amazon is a pickup in Student Prime membership subscriptions and incremental product sales, with eventually converting them to full Prime membership," Versace concluded.