Amazon eyes mobile payments, POS

 
May 6, 2014 | by Will Hernandez

In 20 years, Amazon has transformed itself from a simple online bookstore to an influential media empire. Consumers these days trust Amazon as a brand more than their financial institutions and some legacy payments companies.

Amazon sits third behind PayPal and Visa on Javelin Strategy & Research's Trust Innovation and Privacy Protection list, which the firm determines every year through a survey of almost 6,000 consumers. Yankee Group's recent U.S. Mobile Marketing and Commerce survey found 82 percent of consumers have a favorable impression of Amazon. One in three respondents in that survey also would choose Amazon as their most likely mobile wallet vendor.

Amazon has yet to reveal any public plans involving mobile payments, but is well positioned to make an impact with a wallet, a mobile point-of-sale system or a combination of the two. The company's lofty status with consumers could help it quickly gain widespread consumer and merchant adoption.

"All of these companies that started with e-commerce roots are now eyeing the physical world opportunity because that is where the bulk of the transactions are," said Jordan McKee, an analyst dealing with mobile marketing and commerce strategies at Yankee Group.

Software as a service

Amazon likely will approach the brick-and-mortar point-of-sale opportunity in the same way as Leaf, NCR Silver and ShopKeep, McKee said. Those companies offer small- and medium-sized businesses software-as-a-service products that combine front-end capabilities such as payment acceptance with back office tools like inventory management, tracking employee hours and other related business tasks.

"I think once you move up a bit [from micro merchants] and start dealing with SMBs that have higher volume coming through, software as a service is definitely the most lucrative approach," McKee said. "Looking at the success of ShopKeep, Leaf and NCR Silver, it seems like the way to go from a revenue standpoint."

McKee also envisions a scenario where consumers could pay with Amazon Payments and the One Click checkout process at merchants using a potential Amazon point-of-sale system.

"I think there's some potential to pair [Amazon Payments] with a POS solution, so Amazon could have a complementary wallet application and you can simply pay with Amazon," McKee said. "They already have something like 215 million cards on file, which is certainly not Apple numbers, but it's a strong base to start with."

Amazon also has a large merchant base to work with should it decide to release a software POS system capable of working with Kindle Fire tablets.

Amazon in January announced a record-setting year for its Marketplace Sellers in 2013. Some 2 million merchants worldwide sold more than a billion units of merchandise worth tens of billions of dollars.

"If you're going to be successful in mobile payments, you have to bring businesses along with you," said Mary Monahan, executive vice president and research director for mobile at Javelin Strategy & Research. "Amazon can be very successful out of the gate."

Amazon potentially has another goldmine on its hands as it transitions into grocery fulfillment. In a recent SEC filing, company CEO Jeff Bezos said Amazon Fresh was expanding to Los Angeles and San Francisco after a five-year pilot in the Seattle area. Amazon partnered with high-profile specialty food providers in both cities such as the Cheese Store of Beverly Hills and Pike Place Fish Market to provide same-day order fulfillment of fresh grocery items.

The move shows Amazon's versatility in the market and its ability to connect with merchants that sell just about anything. A mobile point-of-sale product would be another extension of its merchant offerings.

"If they develop a mobile POS system that allows the small merchants to connect with the other infrastructure capabilities it offers, now it becomes a pretty powerful tool," said Ben Jackson, a senior analyst with Mercator Advisory Group. "If you're a small business that's selling some kind of specialty item, and you're using Amazon fulfillment for that, Amazon is handling the payments processing online for those transactions and your servers are hosted on the Amazon cloud.

"Amazon can come to you and say, we have a tool that can connect you to all this other stuff, but also let you do offline transactions as well. We can bundle these services as well. That can become a pretty powerful selling point for someone who is a small merchant and doesn't have the sophistication to deal with merchant acquirers."

McKee also points to Amazon's acquisition of key assets that belonged to GoPago as another indication the company is about to enter this area.

GoPago, a former Italian startup, offered consumers a mobile app they could use to pay for goods before visiting a store. The company gave merchants the ability to process such orders.

Amazon mobile wallet

On Thursday, the website Boy Genius Report published photos it claims are the first clear look at Amazon's smartphone. The company reportedly plans to reveal the phone next month.

Amazon said in an email that it does not comment on rumor or speculation when asked about the phone or mobile payments plans. The Boy Genius Report story is not the first to suggest Amazon is on the cusp of releasing a smartphone.

Other media outlets have gone so far as to suggest Amazon is prepping a mobile wallet service consumers could use to pay for items in brick-and-mortar locations via an NFC-enabled smartphone. Bloomberg first reported the supposed initiative three years ago.

Amazon, however, could face some pushback from its competition should it decide to go the mobile wallet route.

"Amazon is regarded by Walmart and Target as a staunch competitor and certainly they won't feel too good about Amazon coming in and starting to have access to their data," McKee said.

Amazon also could face the same obstacles PayPal has in physical environments.

"It's very difficult to build a two-sided value proposition if they are hoping to go the wallet route and the POS route," McKee said. "It's very difficult to get adoption on both sides of the equation. They're going to have to focus on incentives as everyone else is trying to do. I'm not sure what Amazon will be able to do better than those who are already tapping into the market right now."

Amazon's good standing with consumers and merchants could be enough to overcome such issues.

"Amazon has a good security track record, nothing major since Amazon's inception," McKee said. "Amazon has done a great job with the customer experience; they've made commerce very seamless. They continue to be a consumer champion with Amazon Prime and recommendation services. They have nailed the total experience from a lot of different perspectives."


Topics: Mobile Payments , Omnichannel / Multichannel , Online Retailing , Payments , POS


Will Hernandez / Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.
View Will Hernandez's profile on LinkedIn

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