Amazon.com, Inc. (AMZN) is ramping up its efforts to compete head-on with PayPal Holdings Inc (PYPL) and Apple Inc. (AAPL) in the world of web-based payments.
PayPal, of course, is the name many consumers most frequently associate with digital payments, and the service rose to prominence as the default payment system of AMZN competitor eBay Inc (EBAY). AAPL, for its part, is making a serious push into mobile payments with its Apple Pay technology.
Now Amazon wants a piece of the massive pie too, and is making aggressive moves to expand its Amazon Payments service for online merchants.
Here’s what AMZN is doing in its payments push — and why competitors like PYPL shouldn’t take it lightly.
Amazon Payments Adds Certifications
In order to blitz-scale the spread of its Amazon Payments platform, the giant e-tailer is offering certifications to e-commerce platform providers and developers who already provide e-commerce services to online merchants. By offering these partners training, tech support and other tools, AMZN is securing a distribution network for its PayPal-like service.
The program, called the Amazon Payments Partner Program, should certainly help attract more users, even though the service has already scored some big wins.
Before we go there, however, just what exactly is Amazon Payments? Basically, existing AMZN users can log in to their accounts, and simply use the credit card information on file with Amazon to pay for their order … no need to manually enter it yourself or navigate away from the order page.
As the Amazon Payments website brags: “It’s fast, easy and trusted — leverage the Amazon brand to grow your business.”
If you’re not yet seeing how AMZN is threatening PYPL … well, you’re about to.
Merchants using Amazon Payments will pay a transaction fee for allowing their customers such a convenience. Domestically, it’s 2.9% plus 30 cents per transaction. PayPal’s fees are exactly the same. For international transactions, AMZN charges 3.9% plus 30 cents per transaction, while PYPL charges 3.9% plus a fixed fee that depends on the currency of the payment.
While Amazon would love for small- and medium-sized businesses to start using its e-payments service, the Seattle retailer already has some big-name companies using Amazon Payments. Southwest Airlines Co (LUV) lets passengers use the service to pay for in-flight purchases in its onboard entertainment system, while Volkswagen Group of America, a segment of Volkswagen AG (ADR) (VLKAY), and Merrell footware, a subsidiary of Wolverine World Wide, Inc. (WWW), also use Amazon Payments.
More big (and small, and medium) companies are sure to follow, which should be great for Amazon. However, it’s more a negative for PYPL than it is a positive for AMZN.
Analysts expect PayPal to take in $10.66 billion in revenue in 2016, while they’re projecting Amazon’s sales to reach roughly $130 billion. If Amazon were to take 10% of PayPal’s revenues this year, it would merely increase Amazon’s 2016 revenue by a paltry 1.3%. Meanwhile, PYPL is out one-tenth of its business.
We’ll have to wait and see how Amazon Payments catches on, but considering its ubiquity and trustworthiness, I don’t think it’ll have much trouble.
Watch out, PayPal.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
