In Alternative Payment Fight, Amazon Wants To Reverse Google’s Move

Written by Evan Schuman
May 4th, 2009

With the E-Commerce alternative payments space heating up, the market is getting ready for a nasty fight for third-place between Google and Amazon. EBay’s two contenders in the race—PayPal and BillMeLater—are now essentially tied with each other for having the most large retailers as clients.

With EBay with a seemingly tight lock on the first two slots, it’s been interesting watching two other Web pioneers figuring out what to do. Google had invested in BillMeLater and was hoping to ride that horse against PayPal, until PayPal bought all of BillMeLater. BillMeLater quickly then lost its Amazon client and the war was on.

Google hasn’t been faring especially well, with some seeing Google’s move in April to boost prices as desperate. Then on Thursday (April 30), Amazon counterpunched, offering to waive fees for five months for retailers who would be new customers for its Amazon Payments program.

The Amazon offer was quite limited, excluding any existing consumers, having the fee waiver only lasts five months (from April 29 through Sept. 30). Technically, it would be five months for those who signed up immediately. The deal isn’t for five free months, it’s free transactions until Sept. 30, apparently regardless of when a merchant signs up. The deal also has an especially low ceiling, with Amazon saying that the fees will start sooner than Sept. 30 if $2 million or more is sold.

Those limitations aside, it’s a clever offer to make right after Google Checkout is getting guff for a price adjustment that seems to be a price hike. Amazon presumably isn’t going after large retailers and is quite content to attract legions of smaller players around the country. Not only would a $2 million ceiling make little sense for a major chain, but the cost in terms of dollars and operational disruptions of adding a payment option would easily blow away the savings from five months of fee waiver. (Not that a major chain would have any trouble negotiating five months of fee waiver as part of a routine deal.)

For the smaller player, the interest in accessing Amazon’s credibility and relatively hardened E-Commerce mechanism is high. For them, those fees could be killers, which is why an almost half-year waiver could very well bring in a lot of serious tire-kickers. The ability for consumers who are already using Amazon to use payment information from their accounts without the need to re-enter the information might make this an interesting opportunity for them to get a ready-made installed base of prospective customers.

In this race, it may not be crucial who gets the’s and’s of the world. The ocean of smaller retailers—in total—could be a much more profitable prize.


3 Comments | Read In Alternative Payment Fight, Amazon Wants To Reverse Google’s Move

  1. RK Says:

    The 80-20 rule applies here. 80% of transactions on Internet happen on 20% of sites. These sites are very large merchants. They would not be interested in Amazon offer since the ceiling is very low (2 million) for them. Some of them are so huge that they will reach the ceiling within a day. Amazon needs to concentrate on Kindle than a payment system.

  2. Evan Schuman Says:

    Editor’s Note: Not necessarily. If a payment service can strongly (or even overwhelmingly) dominate that 20 percent, that’s a huge and very profitable situation.
    P.S. Based on the figures we’re seeing, not so certain the 80/20 numbers still hold. There are a ton of small sites out there doing well in their niches.

  3. Greg Says:

    The 80/20 rule is what the book “long tail” was all about. There are so many people, in this case businesses and purchases, in the 80% outside the top that if a company can dominate there they could make more than if they just compete in the top 20%.

    The 80/20 rule is slowly becoming less of a factor because of the internet. More people are spreading out more and more which isn’t getting rid of the top sites/companies but it is spreading the sales so the top sites/companies are seeing less while the end of the tail (the bottom %) are seeing more.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.