Amazon Coin

Amazon has officiallly launched its own micropayment currency, called Amazon Coin.  Currently, one ‘coin’ is worth a penny, which makes it somewhat simple for calculating the exchange rate. It is designed for buying digital content for the Kindle, from books to apps, and customers buy or earn Amazon Coin in order to load their account.

With a name like “Amazon Coin”, there’s sure to be comparison to the BitCoin phenomenon, but they’re nothing alike.   Getting an Amazon Coin will be akin to sticking a $10 into the arcade token machine and getting forty brass tokens to stick into the pinball machine.  A Coin is worth one hundredth of a dollar; when the dollar fluctuates, so will the Amazon Coin.  Calling it a ‘coin’ is a bit of a misnomer; in the business world, internet currencies are “tokens” or “coupons”; only governments make coins.  But, whatever symantics Amazon thinks having online coins will avoid scrutiny from governmental entities is their own problem.

So why even call a “Coin” something different?  Why not just call them Amazon Gift Cards – which are already a thing, a way to get your money into Amazon in bulk to use for smaller transactions.  One thing about it being a “Coin” is that it becomes a purchase transaction, rather than a gift card which is increasingly regulated as persistent storage for money.  I’ll bet that there will come a day when app developers and participation in the Mechanical Turk will have the option of being paid in Amazon Coins.  This makes Amazon a barter-world: you do work that earns Amazon real money, and in payment you get tokens to spend at the Amazon store.  Sounds a bit like company scrip, don’t it?  Scrip isn’t horrible, as long as it isn’t misused.  Amazon isn’t dumb enough to require all transactions to be made with the same virtual money system, but if they did they wouldn’t be the first to try and restrict payment options.

Buying Amazon Coins diverges from the gift card model when you try and buy them: the more Amazon Coin you buy, the deeper the discount you get.  Spend $90, get 10,000 tokens (equivalent of $100).  Let’s see a gift card do that – even though there’s no real reason a gift card couldn’t have bonus dollars loaded during the transaction.  You can buy a gift card and then sell it to somebody; there’s a transferability in it.  Amazon Coins, not so much: according to the terms of use, you can’t transfer them or redeem them for cash.  You’re stuck buying products from Amazon – but you can bet that somebody will figure out how to capitailze on the 10% bonus and come out ahead.  But, since this is a retail transaction, Amazon can decide to stop selling coins to somebody if they don’t want to.   All this puts more control in Amazon’s hands, which doesn’t always sit well with people — which is why eBay relaxed their PayPal requirements for sellers.

The other benefit for Amazon, aside from giving free Coins when buying the tokens, they can just hand them out willy-nilly without using coupon codes or other odd redemption processes.  If you own a Kindle Fire, you’re getting $5 in Amazon Coin just for free, to encourage the use of the system.  Go ahead and spend them, but be careful when converting your dollars into Amazon Coin: be aware of what you’re getting for your money, like any other product you might buy.

The Children’s Bank

They always say you need to start kids young when it comes to financial learning, and an unusual group in India is taking that to heart.  The Children’s Development Khazana is a child-run bank focused on helping street children build financial security through microtransactions. The project has been around since 2008, but only in the past few years the project has seen huge increases in membership, and has expanded into other south Asia countries as well.

The system works as a credit union of sorts, with membership only allowed for kids who make their money ethically, not through begging, drugs, or other illegal activities.   The bank offers passbook savings accounts, in the traditional “write by hand” method, for their members.  The bank, as a whole, manages a single savings account with a financial institution, which earns interest that is distributed to accountholders.   The ‘peer review’ method of operation seems to be successful:  rather than being told by adults how to handle their money, the bankers and tellers are mostly children, and are accountholders as well, so negotiations are handled between people of similar age and stakes in the bank.

Also, like most microfinance systems, the CDK also does microlending, requiring a defined business plan of course, making them as functional as a full-service banking institution for the poor and homeless children of India.   Hopefully the goals of the Children’s Development Khazana will come to pass, helping elevate the children out of poverty, and put them on a track of financial independence by teaching them how to properly manage money at such a young age.  Similar programs are also thriving in a few places around the U.S., largely with educational goals rather than povery-reduction, making the stakes not nearly as high.