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Alexander Peschkoff


Alexander Peschkoff - TEDIPAY

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Innovation in Financial Services

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Amazon vs PayPal

25 June 2012  |  8715 views  |  0

Amazon and PayPal have never been friends. Their "mild animosity" goes back to 2003 when Amazon launched services aimed at (small) e-merchants, thus muscling in on the eBay's territory.

In August 2007, Amazon unveiled its wholly owned subsidiary - Amazon Payments - created to provide a range of ambitious (and, at that time, quite innovative) payment services, setting its sights on PayPal's dominance of the alternative payments market. In December 2007, Amazon invested in Bill Me Later - a company that offered ground-breaking instant credit service.

A year later, in December 2008, Bill Me later was acquired by PayPal's "mother". Amazon promptly gave Bill Me Later the boot - and that was the first indication of Amazon's "go it alone" philosophy in respect of payment services. It is not totally clear why Amazon didn't get to - or decided not to? - own Bill Me Later, but it was rumoured that Amazon intended to develop its own competing consumer credit service. The "go it alone" underpins most, if not all, efforts of Amazon Payments.

The company operates within the secretive (think Apple) "walled garden" and is rather distrustful when it comes to a collaboration with the third parties. In particular, Amazon is - understandably - protective of its customer base and, especially, the related data flow. The value of who did what, where, how and when is well understood - analytics related to consumers' browsing and shopping activities forms the foundation of Google's (monetary) success. 

However, Amazon has a dilemma there - they are extremely protective of any data related to their customers, yet Amazon's offer to online businesses has an inherent conflict of interests. If you are an online merchant and allow your customers to "Checkout with Amazon" (there is an element of user convenience there), you also let Amazon see who bought what and when. Guess what Amazon is likely to do with that data...

Payments is a multi-party industry. It is hard to develop a compelling solution working in a closed secretive environment, unless it concerns fraud management (even then, anti-fraud "networking" solutions are becoming a big business). Going it alone will not get you far - even the mighty PayPal is getting less traction than originally anticipated. It takes two to tango; it takes a handful of willing partners to deliver the "Wow!" payment solution (Google understands that well).

It is hard to make money with pure "payments only" play, you have to be part of the issuing or acquiring or both "circles of influence" (unlike Amazon, PayPal has a banking license). Just having card details even of a large user base means little from the payment perspective: there are dozens of companies out there (think subscriptions, games, travel etc) who have a customer base - with debit/credit cards and bank account details - that rivals that of Amazon. Does that make those companies a potential PayPal?

Many high-ranking executives from the European payment industry whom I recently talked to had never heard of Amazon Payments. I didn't find that surprising - there is nothing sexy about Amazon Payments, they don't excite either consumers or businesses.

Amazon had a great success with their "walled garden" Kindle efforts (it would be interesting to see stats for "Kindle vs Kindle app", though, to make a better judgement on that). Can they pull it of alone when it comes to online or mobile payments? Who would they need to partner with (or acquire) to catch up with - let alone beat - PayPal/Google/Apple?

(By the way, there are two registered members from PayPal here at Finextra, and none from Amazon.)


TagsMobile & onlinePayments

Comments: (1)

Alexander Peschkoff
Alexander Peschkoff - TEDIPAY - London | 28 June, 2012, 12:38

Another interesting view of the "Amazon vs PayPal" subject.

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I am the co-founder and CEO of TEDIPAY, the company that is bringing to the market a game-changing platform for secure mobile transactions.

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