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Summary:

[qi:012] Amazon, in its bid to become the underlying utility of the new web world, today confirmed what had been rumored earlier: a payment service that will compete with PayPal and to some extent, the nascent Google Checkout services. Just to be clear, Google Checkout and […]

[qi:012] Amazon, in its bid to become the underlying utility of the new web world, today confirmed what had been rumored earlier: a payment service that will compete with PayPal and to some extent, the nascent Google Checkout services.

Just to be clear, Google Checkout and Amazon FPS are not building their own payment service, where PayPal has a clear lead. Instead they are using the credit card infrastructure to enable payments and online transactions.

As a discrete offering, Amazon Flexible Payment Services (still in beta) may seem like a me-too service. However, when juxtaposed against the whole gamut of web services being offered by the company, it is a Trojan horse like strategy, one that can start to eat away at PayPal’s business.

It is not a surprise, that both Google and Amazon want a slice of PayPal’s cake. In the most recent quarter, PayPal had net revenues of $454 million, up 34% over the $339 million reported in Q2-06. More importantly, PayPal Merchant Services transactions jumped 57% to $4.92 billion globally from the $3.13 billion reported in Q2-06.

PayPal has become a defacto standard in the online transactions and payment services, and for anyone to have a chance to beat them there are two options: use money (and price) to lure the eCommerce players, as Google is doing with its Checkout Service. The second option is to offer a developer friendly service, that can allow developers to embed a payment solution into their offerings. Werner Vogels, CTO of Amazon explains it best:

Using a capability called “Payment Instructions” developers can easily create the charging model that works best for them. For example, they can charge customers in small increments until their accumulated balance reaches a limit, pay a percentage of a digital transaction as a royalty, earn a commission on a marketplace transaction, or allow one customer to pay for another customer and limit their usage to a specific amount.

As developers who are already using Amazon’s EC2 and S3 web services start to embed FPS, what they are doing is slowly shifting the momentum away from using PayPal and other rivals. Allowing the buyers to use their Amazon credentials to buy the goods (or services) from these developers, they are also increasing their economic opportunity.

A small web-app developer can now build, host, process and get paid for his efforts right over the Amazon infrastructure, without having to spend money upfront. As Amazon Web Servies team notes on its blog:

Seriously, the 69 million active Amazon.com customers can now use FPS to pay for the applications that you’ll undoubtedly want to build. On the other end, the first wave of FPS applications will be available very soon.

While I can’t put it as eloquently as uncov does, but I do agree with their thesis that this is going to cause major headaches for PayPal.

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  1. Anything beats PayPal.

  2. FPS is in a stronger position than Google Checkout, because Amazon already has 69 million customers’ credit cards on file. That’s equal to nearly half of PayPal’s user base. Besides, Amazon has much more knowledge than PayPal on customers’ purchasing history. Amazon even has data on what products each user looked at but didn’t buy – or added to his wish list. The amount of info Amazon has access to will continue to grow with each 3rd party transaction FPS processes. I agree; a real headache for PayPal.

  3. Actually Amazon FPS does not rely only on the credit card infrastructure, they also allow direct bank transfers and balances held at the Amazon payment service. Transactions against each of them has different pricing.

  4. I use all three, I prefer Google Checkout, as a buyer it hides personal information data from the Seller, also it hides my e-mail address. It has the lowest fees among all three. If Google is serious with this, they could turn it better than Paypal in no time. If the eBay users sue Ebay for restricting Paypal only in their sites, then many will use Google Checkout.

    1. can you guys tell me is there any live sites with accept amazon fps specially like domain hosting provider ?

  5. Amazon is ready to rock and roll. Their stock prices have been surging for the past 4 months. On a day where the market had a small crash, it shot up $15+ dollars because Harry Potter tripled their profits. Amazing Amazon. Bezos is a genius.

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  6. Amazon Flexible Payments Service Launches Friday, August 3, 2007

    [...] predicted, Amazon launched a new payments web service today called Amazon Flexible Payments Service, or FPS. It will compete [...]

  7. Juicy Links: July 30 – Aug. 3 : Exclusive Concepts Blog Friday, August 3, 2007

    [...] How Amazon is getting a slice of PayPal’s cake [...]

  8. Just a random blog ! Friday, August 3, 2007

    [...] predicted, Amazon launched a new payments web service today called Amazon Flexible Payments Service, or FPS. It will compete [...]

  9. TechCrunch Japanese アーカイブ » Amazonがオンライン決済のFPS開始 Friday, August 3, 2007

    [...] 先日予想した通りAmazonが本日(米国時間8/3)、PaypalとGoogle Checkoutに対抗する新オンライン決済サービス「Amazon Flexible Payments Service」(FPS)を始めた。FPSは「開発者のためにゼロから特別にデザインされた最初の決済サービス」で、「決済の指示を構造化する上で比類ない柔軟性を備えている」とアマゾン。支払いはクレジットカード、銀行口座のデビットカード、Amazon Payments残高転送で行うことができる。 [...]

  10. Amazon seems to be on to something. Google’s offering doesn’t really seem to differ that much from paypal, but Amazon’s offering actually has some innovation!!

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