Amazon Ramps Up the Online-Payments Competition

Amazon.com Inc., the nation's largest Internet retailer, became a larger force in the online-payments market on Tuesday when it unveiled two services that give merchants and consumers more alternatives to eBay Inc.'s PayPal and Google Inc.'s Google Checkout, not to mention the general-purpose credit cards. Both services, dubbed Checkout by Amazon and Amazon Simple Pay, represent Amazon's next step in payments since the company introduced Amazon Flexible Payments about a year ago. Flexible Payments allows merchants' application developers to design their own payment systems on the Amazon Payments platform. A spokesperson tells Digital Transactions News by e-mail that Seattle-based Amazon wants to leverage the payments infrastructure it has spent more than a decade building. He adds Amazon wants customers to be able to more widely use the payment credentials they've given Amazon, even if they aren't buying directly from Amazon. And despite what some analysts say is an increasingly crowded payments market, Amazon sees plenty of room for growth. “We think it is early days in the online-payments space, it's a compelling long-term opportunity, and we're one of a handful of companies with the combination of infrastructure and customer base who are in a position to innovate and build a meaningful business,” the spokesperson says. Both new services essentially allow online retailers that don't want to spend the time and money to design a custom system through Amazon Flexible Payments to get a hosted payment application that uses customers' Amazon.com account information. While they share technological underpinnings, Checkout by Amazon has a longer list of features than Amazon Simple Pay. For instance, Checkout by Amazon can identify Amazon.com customers shopping on the merchant's site and offer them Amazon's so-called “1-click” experience that allows customers to place orders without leaving that Web site. Checkout by Amazon also calculates shipping rates and sales taxes, supports merchant promotions, and creates packing slips. Merchant pricing for both services is competitive with Amazon's rivals. The basic rate is 2.9% plus 30 cents for orders of $10 or more. Pricing under $10 is 5% plus 5 cents. Volume discounts are 2.5% plus 30 cents for monthly charges of $3,000 to $10,000; 2.2% plus 30 cents for monthly charges of $10,000 to $100,000, and 1.9% plus 30 cents for monthly charges above $100,000. Analysts and bloggers on tech sites immediately began assessing how much of a splash the new services would make. Scot Wingo, president and chief executive of ChannelAdvisor Corp., a Morrisville, N.C.-based e-commerce application developer, and a close observer of eBay, noted on his blog that Amazon has 81 million active customer accounts, a number Amazon disclosed at its recent quarterly conference call. That's more than PayPal's 62.6 million active users as of June 30. But he said that while Amazon might have tried a low-cost pricing option such as the automated clearing house, the pricing seemed “pretty standard, if not on the high side.” More important, online retailers may be wary of using a payment service from Amazon, a merchant that has expanded into a broad line of goods in recent years. “Amazon's biggest weakness in general in the world of e-commerce technology like this is that they are trying to be both a technology provider to retailers and a competitor,” Wingo wrote. He later added: “This actually plays to PayPal and Google's advantage and I'm sure as a first response we'll see them play up these fears: 'Do you really want Amazon seeing all of your transactions, learning about your top sellers, and then using that data to compete with you?'” The Amazon spokesperson responds, “In fact, we have well over a million active seller accounts, and have built a very meaningful business working with sellers to use everything from our fulfillment to customer service to our Web site.” Another observer, consultant and former MasterCard Inc. executive Steve Mott of Stamford, Conn.-based BetterBuyDesign, says Amazon's new offerings represent yet another “disruptor” by an alternative payment system that could lure merchants away from traditional merchant acquirers and independent sales organizations. “If this is successful I think the Internet business and the mobile [payments] business after it is going to vacate the processing world,” he says. “The processors stand to lose a very fast-growing section of the market if they don't pay attention.” Asked about Google's response to Amazon's new offerings, a Google spokesperson says by e-mail “Google Checkout is designed to improve the online-checkout experience and to make shopping through our search and advertising products more efficient. We welcome any innovation that creates a better online user experience, from new online payment types and developer tools, to services like Google Checkout that increase the power of search and online ads.” The spokesperson says Google Checkout has “hundreds of thousands” of merchants in the U.S. and United Kingdom, and “millions” of buyers in more than 140 countries. A PayPal spokesperson could not be reached for comment.