Date posted: 11/06/2019 10 min read

Talking to Amazon’s money man

Could there be a Bank of Amazon? Its treasurer Kurt Zumwalt is helping the behemoth push into fintech and other services.

In Brief

  • Amazon’s global treasurer Kurt Zumwalt heads a finance team of more than 100 spread from Seattle to Luxembourg, India and China.
  • In January 2019, Amazon reported annual revenue of nearly US$233 billion, with operations in 14 countries.
  • Zumwalt takes a leading role in Amazon’s internal fintech initiatives, following his patenting of the very successful Amazon Currency Converter App.

As Amazon global treasurer, Kurt Zumwalt manages a coffer bigger than that of many nations. An Amazonian for nearly 15 years, he has played a key role in one of the most rapid expansion stories in corporate history.

In 24 years, Amazon has transformed from an online bookseller into a diversified behemoth and quasi-financial institution in its own right, with a market capitalisation of close to US$800 billion, and annual revenue above US$230 billion.

Zumwalt’s remit includes foreign exchange, fixed income and cash management, leasing, insurance and lender finance. He also takes a leading role in Amazon’s internal fintech initiatives, following his patenting of the wildly successful Amazon Currency Converter App.

Speaking to Acuity from his office at Amazon’s Seattle headquarters, Zumwalt reflects on how he manages it all, and the practicalities of creating a culture of innovation.

Zumwalt says when he joined Amazon as assistant treasurer in 2004 he found a home where he “believed in the mission of fulfilling customer needs”.

“What was incredibly compelling to me was the opportunity for innovation and growth – the learning opportunities for me both personally and professionally.” He hopes “to remain open, adaptable and flexible” always.

When Zumwalt arrived at Amazon, nearly a decade after it was founded, the company had just turned its first profit. The entire finance team consisted of five people, four in Seattle and one in Luxembourg.

“Now I have a team of over 100,” says Zumwalt. “The headcount in Luxembourg has grown to six, we have five people in China, a lot of people in India and I’m looking at other regional treasury structures in South-East Asia and the Middle East, among other areas.”

However, the growth in the finance and treasury team seems relatively modest in the context of the massive growth of the company it serves.

How big is Amazon?

Kurt ZumwaltKurt Zumwalt 

In January 2019, Amazon reported annual revenue of nearly US$233 billion. The company has operations in 14 countries and employs more than 600,000 people.

The number of business verticals Amazon operates in has exploded. The online retailer has expanded from its original books business into a multitude of consumer product categories. It has also emerged as a leader in the technology device market with the Kindle e-reader and Alexa – its voice-activated personal assistant powered by artificial intelligence.

Along the way, Amazon has also launched a television streaming service and film studio and become a major global player in cloud computing through Amazon Web Services (AWS). In 2017, it entered the bricks-and-mortar supermarket game with the acquisition of Whole Foods.

“When I joined back in 2004, we were only in a handful of categories and geographies, and annual revenue was US$8 billion,” Zumwalt says.

“Scale” and “complexity” are words Zumwalt uses often in describing what Amazon’s treasury function must deliver, and he is as cognisant of customers and their needs as he is of internal stakeholders and third-party providers.

He calls out “maintaining tight controls” and “minimising manual workarounds” as two key principles that underpin all of the decisions he makes – both strategic and tactical.

The coordination of a truly international team is also critical. “As we have grown we have adopted a ‘follow the sun across the globe’ approach in terms of putting in real-time local support. That has been an effort to be closer to our customers, not only external customers but internal as well.”

How Amazon expands internationally

Every time Amazon launches in a new country, Zumwalt needs to quickly tap into a deep knowledge of that market and establish solid relationships with its local banks and regulators.

He says his recipe for success has two foundations: leveraging local knowledge and being careful not to barge in too brashly. By way of example, he recalls preparing for Amazon’s launch in Brazil.

“I had never done any business in Brazil, and when I looked around the room I realised that nobody on my team had either,” he says. “So you solicit input, you bring in your banking partners, you bring in other people and take their input and wisdom because you don’t have all the answers.”

Amazon approached its Brazilian rollout with an expansion philosophy Zumwalt calls the “two-way door approach”.

“A one-way door is a big bet and it is difficult to get out of once you are committed, so you need to be very prepared and confident,” he says. “A two-way door is something you can reverse out of, and that enables you to be self-critical and measure yourself as you try different things.”

Amazon’s changing relationship with banks

Over the past 15 years, the dynamic between Amazon and its banking partners has changed dramatically.

“Back in 2004, when we were nowhere near as large as we are now – either in terms of gross scale or complexity – it was very difficult to get the attention of banks in terms of investing with us and looking long term. So I consolidated most of our major cash management operations with a smaller number of banks,” he says.

“Now, as we continue to expand, I’m using more banking partners. This makes sense not only from an operational risk perspective but because of the transactional volume we do on the payments side.”

Today, banks are clambering to talk with Amazon, and Zumwalt has negotiated pricing agreements with primary relationship banks across more than 70 countries, cutting costs by over 85% on a rate basis.

“We work with roughly 45 banks globally, and that is not only on the cash management side but also AWS leasing, where we lease the vast majority of equipment we use in the server and networking space,” Zumwalt says.

“Certain banks have expertise in certain geographies, and so we are consciously working to diversify our banking now, not only from an operational processing and risk perspective, but also from a counterparty risk perspective.”

How Amazon came to Australia

Kurt ZumwaltKurt Zumwalt 

After scoping the market for several years, Amazon launched in Australia in December 2017 with a small office in Sydney and a fulfilment centre in Melbourne’s south-east. The company has since expanded, opening a second 43,000 square metre fulfilment centre in Sydney’s Moorebank in August 2018. Amazon, however, declined to reveal to Acuity how many staff it employs in Australia.

On launch in 2017, Amazon had just over 500 Australian product suppliers, but the company then surpassed 10,000 in its first year as other categories were introduced, and the number of products offered went from 20 million to 100 million.

In December 2018, e-tail management platform Neto launched its fast-track Amazon Product Registration Solution, which enables small and medium retailers to set up Amazon accounts in as little as 15 minutes. The initiative is designed to accelerate the sign-up of local retailers; within two weeks of the ‘beta’ launch the growth in Amazon listing by Neto retailers increased 78%.

Amazon has added a number of new online marketplaces since the Australian launch, including grocer Amazon Pantry. The company is tipped to further disrupt Australia’s A$3 billion grocery market in 2019 if it launches Subscribe & Save, a discounted subscription service for buying household products such as pet food, washing powder and toilet paper.

All this, says Zumwalt, is part of a long-term strategy to grow the Australian business. “We launch relatively small,” he says. “It’s early days and while we are very excited about the long-term opportunities in Australia, we are in a process of measuring and tweaking and innovating and adjusting for local considerations.”

Investment bank UBS expects Amazon to capture about 12% of online sales in Australia, excluding food, within the next few years.

“I feel I have a good knowledge of treasury and cash management in Australia but it’s all about testing things in the market and then making the adjustments as you scale up, and every market is different,” says Zumwalt.

In November 2018, on a visit during the US Thanksgiving holidays, Zumwalt spent a few days at the University of Melbourne presenting seminars to students in the Department of Accounting. It was a chance to seek out knowledge from his local peers.

“I spent a lot of time talking with people there at the university and asking questions about the functional expertise that you need in Australia.”

There has been speculation about Amazon expanding its retail operations in New Zealand, but the company is making no official comment. In 2018, Amazon Web Services quietly advertised more than a dozen roles. The advertised positions spanned sales representatives to specialised technology roles, fuelling speculation of an Amazon office opening in Auckland.

“It’s all about testing things in the market and then making the adjustments as you scale up, and every country is different.”
Kurt Zumwalt

The two-pizza meeting rule

Zumwalt’s extraordinary career is underpinned by a liberal education and a broad range of interests and experience. After completing a Bachelor of Arts at the University of Pennsylvania, with a dual major in economics and political science, he began his professional life as a financial analyst for the Galaxy Group – an aviation business led by former astronaut Gordon Cooper.

From there he moved into banking with Bank of America before spending two years as a treasury analyst intern at Microsoft, a period during which he also completed an MBA at the University of Washington. Roles at micro-processor maker Intel and software company Wind River Systems followed before landing at Amazon.

Zumwalt credits the unique leadership style of Amazon’s founder and CEO Jeff Bezos as instilling the core values that influence his approach to managing the expanding size and complexity of the treasury. Core tenets of the Bezos approach, he says, include “think big”, “dive deep” and “continually innovate from the consumer, working backwards”.

“There’s a concept of a ‘two-pizza meeting’ at Amazon, and it’s all about driving innovation,” Zumwalt says. “If you want teams to innovate, it often begins with a meeting which lasts as long as it takes for no more than two pizzas to be consumed by a small team. It minimises the need for communications, minimises time in unnecessary meetings, and accelerates the decision-making process.”

It was at one of these meetings in 2007 that Zumwalt and two colleagues, in addition to enjoying pizza, came up with the idea for the Amazon Currency Converter. This patented solution lets customers pay in any one of 80-plus currencies for items purchased on multiple Amazon websites.

Customers can now buy items on Amazon websites with a functional currency different from that of their bank-issued credit card. The Currency Converter gives them the option of paying either in the currency of the website, or electing an Amazon conversion rate and accepting the change in currency on their card.

The tool has been a win for both Amazon and its customers, as well as merchants who are able to sell internationally without maintaining multiple currency accounts. In addition to making transactions more convenient, it has boosted revenue by reducing the friction in payments.

“It’s an idea that started with three people in a room, and it continues to expand and be a great example of how innovating on behalf of the customer becomes a win-win for both,” says Zumwalt.

“If you want teams to innovate, it often begins with a meeting which lasts as long as it takes for no more than two pizzas to be consumed by a small team.”
Kurt Zumwalt

Why fintech is a focus

Zumwalt sometimes partners with Amazon’s in-house fintech development unit. Reporting to chief financial officer Brian Olsavsky, the team sits outside Amazon’s operational and customer-facing activities but is charged with driving innovation in finance and tax accounting, and also in the third-party marketplaces and areas such as Amazon Web Services.

A few members of the fintech team are embedded in the finance team, driving innovation in specialised use cases such as treasury and payments.

“The fintech group is absolutely mission critical, and it’s also about making sure that we have the people with that ingrained skillset around the fintech opportunities,” Zumwalt says. “A big part of it right now is understanding the APIs (application programming interfaces) and different data feeds we get from the ERP system, and from the various third-party providers that we use.”

The fintech team still uses Amazon’s two-pizza rule.

“Our small teams help the rapid development of innovative ideas which can be tested and then implemented, and then if they make sense they can be scaled,” Zumwalt says.

Is there an emerging ‘Bank of Amazon’?

Another innovation has been the creation of an in-house insurance operation, known as a ‘captive’ or self-funded insurer. This covers the insurance risk not only of Amazon’s operation, but also provides an insurance option to Amazon’s third-party suppliers.

“The captive approach to insurance allows us opportunities, whether we look at the global property program or workers’ compensation or delivering insurance to our service providers,” Zumwalt says.

“With them, it’s about giving them appropriate insurance to enable their businesses so they can deliver a package of services and products to Amazon customers.”

Suppliers are given the option of purchasing insurance from Amazon, and they can also source lending finance through the Amazon Lending program.

This creates new revenue streams for Amazon, as well as offering capital to sellers who can struggle to access traditional financing alternatives.

Amazon has also started making moves into the health insurance market, offering its own plan to some staff. In early 2018, Amazon announced it was partnering with Berkshire Hathaway and JPMorgan Chase to offer affordable health care services to all their US employees.

It is no surprise that some commentators have begun to talk about the emerging “Bank of Amazon”. That may be a stretch for the moment, but it’s clear that Amazon’s financial services ecosystem is growing.

“With foreign exchange and cash management, there are a lot of synergies there and it is about ensuring that we have not only the right technical tools but also more foundational systemic tools, such as cash pooling and natural netting of the FX [foreign exchange] exposures,” says Zumwalt.

“Because of our growth, and the global scale and complexity, we are thinking about these areas more like a financial institution.”

7 tips for global treasury success

Kurt Zumwalt shares his tips for treasury teams in expanding businesses. 

  • Get the attention of your banks. Consolidate your banking relationships where you can, but use specialists to fill gaps.
  • Look for scale from proven solutions, both out of the box and in-house, as scale can minimise the complexity.
  • ‘Follow the sun’ with real-time support [locating teams in different time zones]. This will work for in-house finance and also for internal and external customers.
  • Use a ‘two-way door’ approach with initiatives where possible. This enables testing and measurement to evaluate success, and you can reverse back through the door if something isn’t working.
  • Understand that you don’t know it all. There are idiosyncrasies in every market, so talk to banks, regulators and suppliers.
  • Look for synergies across functions, such as foreign exchange and cash management, but understand that some functions remain best in silos.
  • Minimise manual workarounds.

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