Amazon Offers Retailers Discounts for Using Its Online Payments Service

May 7, 2018         By: Steven Anderson

When it comes to buying just about anything these days, from clothes to used DVDs and power tools, a lot of people think of Amazon. That’s left brick-and-mortar retailers a bit stymied, though, and a lot of firms wondering how they can compete when Amazon gets involved. Amazon recently got involved on a whole new front, one that’s leaving not only banks but even PayPal wondering how to compete.

The new front in question features Amazon offering up its discounts on credit card fees to other retailers if said retailers turn to Amazon’s online payments service. Such a move would effectively remove Amazon’s ability to profit on payment processing, at least for now, as it would be passing on that profit directly to the retailers who put Amazon’s own service to use.

Swipe fees, as they’re known, are big business; right now, such fees represent about $90 billion per year for a variety of firms involved from Mastercard to Citigroup. Generally, this ranges from about two percent of a transaction for a credit card, or $0.24 for a debit card. ┬áThis fee effectively goes to the retailers if they bring the Amazon Pay service into play in their shops, though it’s unclear as yet just how many retailers have even been offered the option to take the service, let alone have signed up for the chance.

If Amazon can get more users behind Amazon Pay, it’s definitely going to be a bit of a sock to PayPal and credit and debit card issuers. That’s the case no matter what, even though PayPal isn’t really an option on Amazon directly. However, Amazon Pay might have a tough time getting anywhere with the end user; sure, it will be useful to have another option, but Amazon Pay is mainly an outbound payment system. PayPal, by comparison, works both ways, allowing users to not only pay but get paid through it.

Amazon Pay has its work cut out for it, trying to breach a hole in a saturated payment market. Its plan to serve as a loss leader, however, may get some interest behind it, enough to make it a viable alternative.