A pocketful of Coins

One of the early predictions from internet futurologists was that it would enable completely new ways of doing business. This included the creation of new corporate currencies that could be easily traded online, bypassing traditional pounds, dollars and euros. So you could swap your Tesco Clubcard points for Airmiles or buy goods directly on the web using your Nectar card.

Obviously some of this has happened, but the dream of virtual currencies have either remained niche (such as Bitcoin) or crashed and burned (Beenz). But this could be about to change with Amazon’s launch of Coins, a new currency/loyalty scheme aimed at users of its Kindle Fire. From May, consumers in the US will be able to buy apps and games using Coins, which have a face value of a cent. To stimulate the new currency Amazon is promising to give away ‘tens of millions’ of dollars worth of Coins to consumers, which they can spend on Kindle app content.

While it is early stages this is a smart move by Amazon. Firstly, it is likely to get consumers spending more. As casinos know if you can make people feel that the currency they are using isn’t real money (in their case gambling chips) then they treat it with less respect and are more willing to wager it. Secondly, it will attract more developers to create apps for the Kindle through Amazon specifically as they benefit from greater revenues.

But where it will potentially get really interesting is when (not if) Amazon extends Coins to the rest of its products and services. Pricing books, DVDs and the million and one other things Amazon sells in Coins, possibly at a slight discount to local currency, will stimulate a whole new economy that Amazon has a lot more control over. And given the thousands of independent merchants who sell goods via Amazon Marketplace the potential power of this new trading bloc will bring other retailers on board – for example offline shops offering the chance to buy goods in Coins rather than sterling.

At the very least Coins provides a powerful loyalty scheme for Amazon – it can’t be a coincidence that the retailer has just cut its long standing ties with Nectar in the UK. Tying in users means Amazon can learn even more about them and consequently offer more tailored products and services (Amazon Telecom perhaps?), enabling it to continue its expansion. Given the havoc Amazon has already wreaked on the High Street, rivals (and even banks) should make sure they are closely watching the next step in its plans………….

Related articles

• Amazon introduces virtual currency for Kindle Fire apps and games