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Amazon Takes On PayPal With New Payments Program

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Leena Rao
Leena Rao
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By
Leena Rao
Leena Rao
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April 4, 2016, 12:18 PM ET
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Amazon has been touting its payments business recently, and the e-commerce giant is looking to expand the reach of its digital wallet even further with the debut of a new program on Monday.

Amazon’s Pay With Amazon is a way for the site’s 304 million account holders to shop with third party merchants using their Amazon credit cards and shipping details. Amazon users simply sign in with their Amazon account on third party merchant sites instead of having to create a separate login with the retailer, and fill in credit card information. It’s also an alternative to paying with PayPal (PYPL). Merchants who offer the ability to use Amazon Payments include GoGo in-flight Wi-Fi, Southwest Airlines, and clothing retailer All Saints. The fees that Amazon (AMZN) charges merchants who use its payments service are similar to PayPal’s fees, which is 2.9% plus $0.30 for each transaction.

On Monday, Amazon announced a program to integrate its payments option into software companies who power e-commerce storefronts for merchants, potentially expanding its reach to new retailers and merchants.

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For example, Amazon is offering its payments service to retailers using Shopify (SHOP) to power their online storefronts. Founded in 2006, Shopify provides software tools for 243,000 online retailers including storefronts, payment processing, and apps for checkout.

Amazon also previously offered a competitive software service to Shopify and encouraged its users to transfer their storefronts to Shopify.

Amazon said that the program is only available in the United States, Germany, United Kingdom, and Japan.

For more on Amazon, watch this video:

Many other of Amazon’s portfolio businesses, such as its cloud computing business AWS and its subscription service, Amazon Prime, get far more attention from investors. But payments has been quietly growing, although Amazon doesn’t break out exact revenue from its payments business. In 2015, payment volume through the service on other retailers’ sites rose 150% from 2014. Over 23 million Amazon customers have used their Pay with Amazon accounts at non-Amazon merchants over the past two years. Working with the companies that power online storefronts for retailers, such as Shopify, is another way to increase transactions.

However, online and mobile payments are more competitive now than ever. PayPal, Apple Pay, and Google’s Android Pay all offer mobile wallets and let merchants and app developers accept payments on mobile phones.

There’s also the challenge Amazon faces persuading online merchants to use its PayPal-like service. Amazon’s online marketplace is often a competitor to other online retailers, some of which may not want to share data with the e-commerce juggernaut.

But Amazon has said in the past that the payments data from Pay with Amazon isn’t shared, and that actual transaction data is private.

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