First, they cornered the book market online. Then they conquered toilet paper and toothpaste. Now, online retailer Amazon.com Inc. is dipping a toe into the waters of banking. Now, a Prime Membership with Amazon won’t just get you streaming movies and discounts on kitty litter and two-day shipping, it can now also get you a discount on your student loan.

Up until six years ago banks and other private lenders made a reasonable profit on federally guaranteed student loans. What changed? The government began loaning directly to the college students in 2010. Private lenders got a much smaller market share of the student loan pie, and low interest rates made turning a profit even more difficult for banks and credit unions.

However, even if the interest income is not as lucrative as it once was, it is still income, and private lenders are looking for ways to get a larger share. This is where Amazon comes in. With it’s populous use and history of discounts, they have teamed up with Wells Fargo to offer a 0.5% discount on student loans with a Student Prime membership to Amazon. Additionally, Wells Fargo will reduce the rate by a further 0.25% for those who enroll in an automatic monthly repayment plan.

From Reuters comes this quote: “Amazon’s looking for increased membership in Student Prime. That’s what they want out of this deal,” John Rasmussen, head of Wells Fargo’s Personal Lending Group, said in an interview. “What we’re looking for is exposure to our products and services and awareness. That’s the extent of the relationship.” Rasmussen went on to say that neither party in the deal receives compensation from the other, this is more about the mutually beneficial visibility for both companies.

Wells Fargo gets more lending volume, and Amazon gets students enrolled for half the amount of the regular $99 per-year subscription fee, which hopefully gives them enough time to grow accustomed to the perks of Prime membership and stay members for years after graduation.

With direct federal loans offered at fixed rates of 3.76% for the 2016-2017 Stafford loan, no co-signer required for the lowest rate, and an income-based repayment plan that matches monthly payments to a percentage of post-school earnings, it’s not an easy road for private lenders looking to be competitive. JPMorgan Chase & Co was so frustrated by the student loan business that they exited the student loan market altogether in 2013, saying that it was too difficult to compete with federal government programs.

Will Amazon creep further into banking territory? They may move into more financial services, but probably not into outright banking. And they shouldn’t. There are only so many ways to offer a discount in the banking sector, and that’s the brand that Amazon has associated themselves with. However, Amazon excels at customer service and has the Prime infrastructure in place, which may mean more loan servicing could be a natural extension of Amazon’s capabilities.  

Victor Notaro is an accomplished Corporate Banking Executive with a demonstrated record of success leading consultative and relationship management strategies in the financial services industry. Victor Notaro is skilled at building and managing high performing teams of professionals in commercial and corporate banking, fostering relationships with middle market and multi-billion dollar companies. Victor Notaro’s record reveals exceptional performance in the development of business capital strategy, with expertise spanning start-up of business units, leading YOY revenue growth, and producing sales in the millions of dollars. Victor Notaro is the Senior Vice President, Corporate Banking / MidCorporate Banking at Citizens Financial Group.