Amazon FPS

Jim Daly of Digital Transactions wrote a good piece on Amazon's Flexible Payment System (FPS) in the April 08 issue. Here are some of the key takeaways:

  • Amazon's investment in alternative payment provider Bill Me Later last December was their first public move into the payment processing space. Using Bill Me Later, Amazon expects to not only lower their own transaction costs (by ~.50 bps) but hopes to also increase sales by capturing more impulse buyers.
  • The launch of FPS is most likely part of a larger play for Amazon, like......
  • FPS pricing has some customers unhappy. For example, the 1.5% on bank transfers and amounts charged on stored value balances (Amazon essentially double dipping).
  • Beta user Buxfer gave the FPS technology high reviews but cited the requirement that both buyer and seller need an Amazon account as the biggest drawback.

From my standpoint, I would call out two things. First, I wonder how many ewallet providers will be able to cross the tipping point of scale with both the consumer and merchant. If there aren't enough consumers demanding the payment option merchants won't offer it as an option and if merchants don't offer it as an option consumers won't use it.

Of the three major players, PayPal has become much more inclusive in their offering, Amazon remains exclusive (both buyer and seller must have an account), and without a larger user base to begin with, I just don't think Google checkout will be able to pick up enough steam.

Then of course there is a rush of new ewallet type providers (using a device like a mobile phone or payment instrument such as a phone number) crowding their way into the market as a preferred payment providers. Secondly, I think the most significant thing FPS did was build sophisticated payment processing logic on their end - instead of making that the merchants responsibility. In nearly all the payment systems today, the logic is built and maintained by the merchant. At the same time, in reading through all of it's capabilities - I'm left wondering, who again needs this?

The article is only available in pdf format and I had to post the entire April issue. If you're interested in reading the article it starts on page 24.

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