Evan Schuman's StorefrontBacktalk

When Amazon (NASDAQ:AMZN) was awarded a patent this week to allow for anonymous online purchases—anonymous from shopper to shopper, not anonymous to Amazon—it could be the world’s largest e-tailer taking its next step into payments. The actual money part of the payments are still to be handled through the same means Amazon does today—payment card, bank account debits, gift cards, Amazon Store Card, etc.—so it’s not about Amazon becoming a processor.

What it does, though, is add a layer on top to allow consumer-to-consumer transactions to be done without sharing private information with strangers. (Or, much worse than strangers, relatives.)

When this approach would make sense depends on the nature of the transaction. If the purchase involves the seller sending a physical product to the recipient, the recipient has little choice but to reveal name and street address. But for digital purposes, it could work well. And it might even work with physical shipments, assuming the recipient uses a post office box or some similar alternative.

In theory, this is how it would work, assuming Amazon ever chooses to use it. First, both of the parties have to sign up with Amazon, which acts as the broker. The system would issue temporary tokens, which would be charged against the Amazon shopper’s account. Once set up, a shopper could make a $20 payment by texting Amazon “PAY 20.” A response would include a customer-specific code. The code might have a portion of the shopper’s phone number and it might either have an expiration date (for a single transaction) or the code could be setup differently so that it could cover multiple payments.

The patent envisions support for both short message service (SMS) and multimedia message service (MMS).

The patent’s text does the usual patent thing, which is to throw out every possible way the idea could theoretically be used.

Some thought was given to security process, with a mechanism to deal with the payment to be disabled for a “predetermined time” whenever an incorrect redemption code is received. It also mentions the ability to add a standard PIN or password.

“The code may act as an unrestricted payment that may be redeemed by anyone who obtains the code because the payment is transferred via the code. In some embodiments, the code may not be redeemable by some parties, such as the provider or by other designated entities. For example, the provider may add a portion of the recipient’s identification information (e.g., 2 digits from the telephone number, etc.), which could be verified upon the registration operation. By receiving the confirmation, the recipient may know that the funds have been successfully transferred from the provider to the recipient; however, further processing (e.g., registration, etc.) may be necessary for the recipient to receive the funds (e.g., registration at the operation).”

The patent also offered a practical example of how the text commands might work. “The provider may send a SMS text message to the host such as ‘pay 50 temp_ID’ where ‘pay’ is a command to make a payment, ’50’ is the amount of the payment (e.g., dollars, credits, etc.), and ‘temp_ID’ is the temporary ID that was sent to the recipient.”

The shopper-owned hardware wouldn’t necessarily have to be a smartphone, the patent said, listing terminology that reflects that the patent was filed back in April 2009: “a wireless telephone, a portable digital assistant (PDA) and a personal computer.” It also listed devices that are still applicable today: “a television set-top box, a game console, a portable gaming device, a digital video recorder, a portable computer, electronic book readers, netbooks, and other electronic or entertainment devices.”

Amazon’s idea is to expand this functionality to support more of the standard financial commands—including payments, redemptions, transfers and cash reserves—as well as the ability to send money to multiple people, with different permissions given to each. “Multiple uses may be convenient for a provider to use to make reoccurring payments (e.g., allowance for kids, phone bill, etc.), for promotions (e.g., first five people to redeem a promotion, etc.), and so forth.”