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.
29 comments so far
2:42 PM PT
Anything beats PayPal.
2:48 PM PT
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.
2:54 PM PT
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.
3:19 PM PT
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.
4:08 PM PT
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.
CTO/Founder
http://www.fantasysportsmatrix.com
A social network for sports fans.
5:14 PM PT
[...] predicted, Amazon launched a new payments web service today called Amazon Flexible Payments Service, or FPS. It will compete [...]
5:41 PM PT
[...] How Amazon is getting a slice of PayPal’s cake [...]
6:29 PM PT
[...] predicted, Amazon launched a new payments web service today called Amazon Flexible Payments Service, or FPS. It will compete [...]
7:15 PM PT
[...] 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。 [...]
7:44 PM PT
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!!
Startup Stores
http://startupflames.com
11:05 PM PT
[...] predicted, Amazon launched a new payments web service today called Amazon Flexible Payments Service, or FPS. It will compete [...]
5:25 AM PT
Really good news. The bigger fighting between the giants the better services for developers.
Tim.
http://gtd-tools.com
6:15 AM PT
Glad to see that Amazon has really turned the corner in the past year…
PayPal (used to work for them): I still think it will be hard to beat a fairly entrenched player w/an international presence. What I really think this underscores? PayPal needs to make sure that they are a technology company that focuses on ecommerce (my personal opinion is that they’ve shifted to more of a marketing company now).
6:55 AM PT
[...] launches their competitor to Google Checkout and sorta Pay Pal. Om Malik has his take on it. Much more developer friendly, I [...]
11:52 AM PT
Google Checkout is a significant threat to PayPal and Amazon’s new venture because it doesn’t have to rely on transaction fees to make its continued investment worthwhile. My guess is that Google ultimately wants to capture the transaction information to increase the accuracy and value of search and advertising placement. Schmalensee and I call platforms that have different revenue sources “intersecting catalyst” (see http://www.catalystcode.com)–which is what these payment players are.
5:55 PM PT
This is great news…
6:13 PM PT
[...] launched a new payments web service today called Amazon Flexible Payments Service , or FPS. It will compete [...]
4:57 AM PT
I wonder where this meme came from that PayPal is a payment service but Google Checkout and now Amazon are just “using the credit card infrastructure to enable payments.” This is a distinction without a difference. If you are handling the money from transactions, you are a payment service. The companies that just help merchants connect to the card infrastructure, without handling the money, are gateways like CyberSource and Authorize.net (soon to merge). GC and Amazon are not gateways (not to mention that Amazon will allow bank funding as well as credit cards).
4:48 PM PT
I seriously don’t believe its a battle with Paypal or checkout. Its simply an addition to Amazon’s already successful Web services offering. I appreciate their commitment to the developer community.
Here are some thoughts which can take this further.
http://abhishek.tiwari.com/2007/08/05/amazon-the-services-operating-ecosystem/
7:20 PM PT
I use Google Checkout for the sale of advertising space on my website. It has done amazing things for me, I have been able to integrate the store into my advertising page. It’s quick, easy, and secure. I would recommend it to anyone interested monetizing their blog.
9:31 PM PT
[...] prévu, Amazon a lancé un nouveau service de paiements appellé Amazon Flexible Payments Service, ou FPS. Il rivalisera [...]
1:21 AM PT
Om,
I tried Google checkout as a layman buying stuff on buy.com. Other than giving me $20 off my first purchase (which was the reason I tried it in the first place), Google checkout didn’t seem to offer me any reason to use it again.
As an online shopper, I don’t see what Google checkout gives that Paypal doesn’t.
And I’m reserving judgement on Amazon - hopefully it won’t be a science project with little benefit to consumers - not that choice is a bad thing!
4:03 AM PT
[...] Amazon vs. Paypal vs. Google Checkout. [...]
1:04 PM PT
[...] value account as the crucial center of the FPS value proposition. Om Malik points out that the FPS strategy is a Trojan Horse designed to take share from Paypal. I would build on that by saying that FPS can start enable the [...]
8:58 AM PT
[...] about how Amazon Web Services — cheap and elastic storage, computing, message queuing, and payments — could change, or is already changing, their [...]
10:08 AM PT
I personally like Paypal the best because it seems to be the most applicable of the 3 of them when it comes to purchases online. It’s almost a standard.
12:53 AM PT
[...] a payment system with web services that is suppose to be competing against PayPal. Check out amazon vs paypal vs google regarding [...]
5:28 AM PT
I tend to echo Dave’s comment above. This stuff about the infrastructure, particularly from the standpoint of the consumer, is largely a distinction without a difference. That being said, I think these services (particularly Amazon) will be making inroads into this market using something woefully lacking at PayPal: customer service. I’ve personally been very impressed with the Amazon Web Services team’s responsiveness and level of interest in our development efforts. Within 48 hours of announcing AcuInvoice’s support for Amazon FPS, I received an email from the Business Development Manager at Amazon Web Services asking to see a demo of what we had done. You’ll not see this sort of thing from PayPal, and over the long haul it has the potential to pay off big. They’ve also got a pretty robust developers forum, which has been helpful. We’re fans.
11:07 AM PT
Moneybookers is best!!
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