Fintech/Payments Technology

Amazon takes aim at PayPal

Even before Amazon’s acquisition of grocery retailer Whole Foods rocked both the online and offline worlds with the realization that Amazon was extending its presence outside of the Matrix and into the real world, the company has been quietly extending its reach into the dirtmap via its PayPal killer Amazon Pay. TechCrunch now reports that the etailer has launched a new feature, Amazon Pay Places, to help retailers streamline the physical purchase experience. With restaurant chain TGI Friday’s already on board, we could be looking at the future of frictionless payments – or the further balkanization of mobile payment competitors. By Rick Ferguson

Granted, Amazon’s test with TGI Friday’s is a small one; according to TechCrunch, Pay Places is available to TGI Friday’s customers in Baltimore, Boston, Philadelphia, Richmond, VA, Washington D.C., and Wilkes-Barre, PA. The feature isn’t exactly intuitive to use, either; customers must first have the Amazon app installed on their smart phones, and then navigate the app menu to locate the feature, browse TGI Friday’s menu, and then order those Jack Daniel Glaze chicken wings to go by paying with your Amazon account information. The process certainly is more frictionless than the old-school way of calling in a takeout order, but it is far less frictionless than, say the Starbucks app.

Still, the test represents additional evidence that Amazon is using Amazon Pay as the thin edge of the wedge to push Prime into the real world; in select markets, Prime members can already use Amazon Restaurant to have takeout delivered to their homes and paid for via Amazon Pay. The most likely initial target of this push is PayPal, which has a significant head start on Amazon Pay – and given Amazon’s aggressiveness of late, has reason to be worried. from TechCrunch:

“Amazon Pay, largely, is Amazon’s own alternative to something like PayPal. That is, it gives online merchants the ability to add a button on their websites’ checkout pages that let shoppers pay via their Amazon account info. The idea there is that by doing so, customers are more likely not to abandon carts and checkout is sped up. Amazon Pay charges 2.9 percent + $0.30 per transaction, also like PayPal.

“The retailer isn’t disclosing how many merchants are using its payments platform today, but in February it had announced that over 33 million customers have used Amazon Payments to make a purchase to date – a figure that was up 10 million from the 23 million it had in April 2016. Though Amazon Pay is generally associated with e-commerce, Amazon has been slowly rolling it out to the real world, as well. For instance, Amazon last year partnered with luxury clothing merchant Moda Operandi, allowing in-store customers to pay for clothes they previously selected online using their Amazon account information. Amazon Pay Places, then, represents the second use case for Amazon Pay out in the real world.”

As we mentioned, PayPal has a significant head start; the company’s latest quarterly earnings report revealed that the payment processor has grown to 203 million active customer accounts, versus Amazon Pay’s 33 million. On the merchant side, PayPal ended the quarter with more than 16 million active merchant accounts. That’s a far cry from Amazon’s cute little TGI Friday’s test.

Still, Amazon has one weapon in its arsenal that PayPal lacks: A loyalty program. As a recent Retail Dive report notes, more than 50 percent of Amazon Pay users are also Prime members. Prime members, as we know, are very loyal shoppers indeed.

Now let’s extrapolate that TGI Friday’s test into the future: suppose the test is a success, and that TGI Friday’s rolls it out nationally. Then imagine the restaurant chain announces that Prime members receive cash-back on their orders that can be redeemed on Amazon. Then Amazon offers Prime members the same cash-back rewards offer on their Whole Foods orders. Perhaps soon after, Amazon announces partnerships with a fuel retailer and a home improvement store. Then imagine that Prime members who link their Amazon Pay accounts to their Amazon Rewards Visa Signature card earn even bigger cash-back rewards anywhere within the network.

That, my friends, is a coalition loyalty program with Amazon as its hub. Prime is a juggernaut, and PayPal is right to fear it; to compete, the company has announced expanded rewards partnerships with Chase and Citi to integrate those banks’ respective credit card reward programs into PayPal. Amazon and PayPal, we hear, have held off-and-on talks about partnering on mobile payments. If PayPal doesn’t exercise its leverage to make a deal soon, the company may soon find that it’s Amazon that has the leverage.

Rick Ferguson is Editor in Chief of the Wise Marketer Group.

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