I don't know about you, but I'm getting a little wary of all these billion-dollar corporations trying to take over the world. It's not enough that Amazon is the obvious industry leader in online retail, the no. 1 mobile commerce marketplace, a serious competitor in tablet technology, and the indisputable leader in e-publications with its Kindle products. Now it's working out a way to get a cut of other retailers' cash flow as well.
It's not even funny anymore, guys.
Amazon Payments is the retail giant's answer to eBay's PayPal acquisition, and its first foray into the third-party payment arena. It's a bold move that opens up a potential route into every online store willing to cash in on Amazon's credibility.
How Does it Work?
Amazon Payments is in essence an amalgamation of three Amazon merchant services that have been available for quite some time now. I'm talking about:
- Checkout by Amazon: This is a simple html button that creates a start to finish checkout solution on any e-commerce site.
- Amazon Logins: Logins on third-party sites for personalization purposes (launched in late 2012).
- Amazon Simple Pay: Preloaded payment information that's been offered to third-party sites going all the way back to 2011.
Though the marketing for these services hasn't exactly been stellar, the current efforts at combination, repackaging, and buzz-building are bound to rectify that oversight.
Login and Pay with Amazon
Login and Pay with Amazon gives customers the option to pay with information contained on their Amazon accounts, which can add major credibility to small business offerings.
This payment service gives online retailers access their customers' Amazon account information to check out on their websites. By accessing stored credit, debit, or other payment information on a customer's Amazon account, other online retailers simplify their own checkout processes, and gain the added credibility afforded by the Amazon brand.
This also allows you to circumvent the opt-in process for your own customers. In other words, you can simplify the checkout. You eliminate the need for your customers to register their information with your site, and simultaneously save them the trouble of entering in credit card information.
As an added bonus you're underneath by the Amazon umbrella and shielded against online fraud. In fact, you'll be covered by the same A to Z guarantee that Amazon offers its own customers when shopping on Amazon.com.
Of course, it's not exactly free. You pay when the customer pays, Amazon takes a cut off the top. The standard rate is 2.9% +$0.30, but this number fluctuates based on sales volume. Check out the Amazon Payments website for more information on rates.
So why should you give up a slice of your pie to Amazon? I'd be lying if I didn't say there were some compelling reasons. According to Tom Taylor, the VP of Amazon Payments, the site has in excess of 215 million active customer accounts. In other words, integrating Amazon Payments in your e-commerce site gives you potential access to an incredible number of potential buyers.
There have also been some tentatively hopeful personal anecdotes from retailers around the web. For example, Cymax Stores Inc., hopped on the Amazon Payments bandwagon early, before the promotion even began in fact. Cymax director of corporate development Lar Quigly cited a boost in conversions of 3.15 percent, which isn't exactly chump change.
Another anecdotal study comes from a user on Stackexchange.com. According to the results of that experiment, given several options for payment, users most often chose to pay with their bank cards (72 percent of the users paid with bank cards). Amazon Payments, however, came in second place (12 percent), slightly ahead of the more prevalent Google Checkout (9 percent). Though this is an isolated example, it does show that many consumers do care about the usability, security, and convenience of an Amazon-backed checkout system.
The most important question we can ask about this new offering, however, is very simple: Will it take off?
Who's Using Amazon Payments?
Looking at this chart it's obvious that Amazon's popularity among online commerce big wigs is significantly lower than small to mid-sized online retailers. Note the long periods of stagnation in Amazon Payments' usage in the top 10,000 websites.
As you increase the sample size of sites accepting Amazon Payments, however, there is a definite increase in usage, indicative of more confidence that Amazon can be of use to the smaller retailers who didn't make it into the top 10,000. The uptrend is even more sharply noticeable as the sample size moves into seven-digit territory.
Compare this flattering visual with the following graphic, which only considers the top 10,000 websites and their alternate forms of pay distribution:
As you can see, Amazon isn't even rightly visible on the chart. You can't really tell where Amazon begins and Mollie ends. They aren't exactly going gangbusters in comparison to the big timers, PayPal and Google Checkout. Though this isn't exactly an encouraging view of Amazon Payments, it shouldn't be the end-all, be-all on the subject.
After all, Amazon only announced its foray into third-party payment services at the end of last year. Relatively speaking, it's definitely the new kid on the block. PayPal, on the other hand, has been an industry leader since its inception in 1998.
It's hardly fair to compare a kindergartner with a college grad — though this particular kindergartner may end up surprising us, and turning into a prodigy. It's not at all out of the realm of possibility, considering
Beyond competition from PayPal, Amazon has to deal with resistance from its other competitors, the regular commerce crowd, in both online and brick-and-mortar retail.
Major online retailers are holding off because Amazon is their biggest competitor. If they implemented Amazon Payments, they'd be giving the company access to their sales statistics. The same can be said of any online retailer, but some don't consider Amazon a direct competitor because they're niche sellers.
Moving to Brick and Mortar
Meanwhile, Amazon's heavily hinted-at, and ultimately inevitable move to mobile payment at physical retailers is on its way to a store near you. This is going to have a huge impact because of Amazon's mobile presence alone. The site has an extremely well-organized infrastructure, and an expansive list of consumer data that rivals PayPal's in every respect.
Amazon's plan is to offer brick-and-mortar retailers Kindle tablets and card readers free of charge, then let those stores advertise that they offer Amazon Payment options. That's apparently just the tip of the iceberg: Amazon is also rumored to be thinking of offering an entire retail software suite to match the point-of-sale Amazon merchant services. This suite would include:
- Accounting software.
- Website creation tools.
- Inventory management software.
- And possibly much more.
As I mentioned, the software suite is only a rumor as of yet, but the point-of-sale Kindles with Amazon Payments enabled are already on their way.
It seems Amazon's ambition for consumer market share knows no bounds. What do you think? Is the online giant overstepping, or is this just the free market at work? Let me know your thoughts in the comments.