Amazon offers way to pay for stuff not bought on Amazon
Amazon wants to make it easier to pay your bills. The company’s Amazon Payments service enables customers to used the information stored in their Amazon accounts to pay phone bills, monthly fees for music subscription services and a wide variety of other recurring charges.
With more than 244 million active users, Amazon is looking at the opportunity to further advance its position with third-party sellers including those who do not participate on the site’s marketplace.
"If you think about giving a merchant that you may not know very well the right to continue to charge your credit card in the future, you really want to know that a good relationship with Amazon stands behind that," Amazon vice president of seller services Tom Taylor told Reuters. "We hope whoever the next Spotify out there is thinking about Amazon."
![[Image: Amazon Payments]](/public/images/discussions/17576/amazon-payments-still.jpg)
Amazon will make money by charging a fee to merchants on each transaction. The standard transaction fee is 2.99 percent plus 30 cents for transactions of $10 or more. Transactions under $10 come with a five percent fee plus 5 cents per transaction.
Nathalie Reinelt, an analyst with Aite Group, told CNN, "I think it’s smart for Amazon to do this and expand their footprint in the one-click payment space," she said.
Discussion Questions
How does Amazon Payments compare to other digital payment options in the marketplace, such as PayPal? What will Amazon need to do to make third-party sellers feel at ease with its payment service?
Amazon, like Walmart, understands that at the end of the day, financial services are the name of the game.
It’s too early to tell whether or not the Amazon offering will bump off PayPal or how consumers will feel about another digital payment option, but one thing is clear: a lot of people trust Amazon — perhaps more than they trust eBay.
The Amazon brand was built on the back of establishing trust (you order something you haven’t seen and we’ll send it to you), so I’m not sure how much more work they need to do in that area.
The real issue to me is will enough people feel a need for yet another payment system? If they do, my money is on Amazon to win.
I first noticed the thing called “Amazon Payments” when I was buying in-flight WiFi. I was surprised, but not unhappy.
The reason I think this will succeed is simple: the fewer companies I expose my credit card to, the happier I am. So I use PayPal whenever possible, and as an Amazon.com junkie, I’m good with using it as well.
It sounds like this might be a more expensive option than PayPal for merchants, but I’ll defer to the better-informed among us on that topic.
It turns out that all Amazon’s profits come from being an intermediary. At a recent conference I was at, Sucharita Mulpuru pointed out that its Marketplace business generates enough cash to offset the company’s losses in all other lines of business. This is just an extension of that model.
Makes all the sense in the world. I think it’s a winner.
The fee’s too high.
Given that, there are loads of reasons to love this idea. After a disastrous episode with Sirius XM (with a customer service rep yelling “if you leave us, we’ll ruin your credit rating!), I’ve been leery of giving any subscription service my credit card number. Amazon’s service may be a more palatable alternative.
Mobile payments looks like the next tech battlefield for share of consumers’ wallets. (Full disclosure: My son works for Braintree, a division of PayPal which itself is owned by eBay.) Not only is Amazon getting into the act, but Facebook recently hired away the head of PayPal — evidently to ramp up its own mobile payment efforts. All of these companies are finding more robust uses for their mobile sites.
I see two questions looming over the mobile payment industry: First, as more players enter the field (Amazon, Facebook, etc.), will a price war break out in terms of fees charged to merchants? And, more importantly, how quickly will consumers embrace the entire “mobile wallet” concept? The synergy between smartphones and providers’ mobile sites can be powerful, but only if consumers accept the security and privacy assurances of “pay as you go” systems.
Everyone wants a slice of the payment pie: Amazon, PayPal, Google, Apple, the banks, and more. So far consumers have not seen a need for this, even Millennials who are digital natives.
Primarily, consumers are concerned about security. How will Amazon convince consumers that their systems are more secure than a bank’s or Target’s? A data breech at any of the participating merchants could send large ripples through consumer accounts.
Sometime in the future, consumers may embrace one method to pay them all. For now, they are rightfully hesitant.
If the new service works as efficiently as the rest of Amazon’s service, the trust Amazon has amassed makes this new service viable. For those consumers tired of the scams on PayPal, they may be willing to try a new service from a source they trust.
Trust in the brand is a key factor in my opinion, so Amazon will do well here. PayPal had an imbedded base of merchants already, so the battle might be around merchant costs versus consumer adoption. Mobile wallets will not be ubiquitous just yet, but in ten years the “holdout” OlderBoomers/Seniors will be spending less but having more delivered, so if mobile wallets can be simple and readable, they might just catch on!
Merchants will have to decide whether or not it makes economic sense for them. Amazon’s large customer base and profiles make it easier for merchants to navigate the transactional aspects of the shopper experience. On the other side of the equation, Amazon is building on the credibility and trust it has generated across their customer base. So, it’s attractive to consumers (which again elevates the value to merchants).
The likelihood of a successful Amazon security breach (or PayPal) is far less than that for a small merchant. Yet, paradoxically, being an Amazon (or PayPal) puts up a huge juicy bulls-eye for criminal hackers, given the potential payout. So, it’s not without risk.
There is no confusion in the consumer’s mind on the value proposition between PayPal and Amazon. I shop at Amazon and I pay with PayPal. If, however, someone could shop AND pay with the same provider, wouldn’t that be a huge plus?
Once I am hooked into Amazon and they have earned my trust, I could see using them exclusively. Why would I not? I expect Amazon will to do very nicely with this new venture.
And in this brave new world, no one’s worried about putting all their eggs in one basket, so to speak? And that means that all your information, such as payee, payment, where you do your business, what do you buy, what services you use, etc., will reside with Amazon, in addition to your credit card company?
Amazon already has enough information on your purchases and activities with them. And the idea of a security breach? As Amer wrote, it may make them more of a target. I’m still very happy with my Bill Pay system at my bank, signed, sealed, and delivered, thank you.
And I worry about the day, which I don’t think is far off, when by some catastrophe all computer and internet information, from your documents to your transactions, will be killed off by some greater force, disappeared, gone, forever, and then it’ll be Road Warrior….
This is expensive, and doesn’t really offer any true advantage over many of the other options currently available. Seamless integration of their payment services is critical for Amazon, but also an inexpensive offering for the marketplace is important.