Amazon.com Inc.’s payment service nearly doubled the number of transactions it processed in 2016 from the previous year, but even with the substantial growth, its volume remains far lower than the likes of PayPal and big internationally based payments players like Alibaba Group Holding Ltd.’s Alipay.
Amazon Payments’ service, called Pay with Amazon, allows shoppers to check out on other merchant websites using the payment information stored in their Amazon account. Amazon says more than 33 million customers completed a transaction using Pay with Amazon on another website since its introduction in 2013, Amazon said this week. Of those users, more than half are Amazon Prime members, Amazon says.
By comparison, PayPal Inc. has 197 million customer accounts and processed $6.1 billion worth of payments last year. Alipay, which corners the market in China, has 450 million users and processes 175 million transactions a day.
Pay with Amazon–which recently became available for merchants in France, Italy and Spain–has a global bent with customers in more than 170 countries using the mobile wallet in 2016.
The service also fueled its growth by extending Pay with Amazon to nonretail sites, including government, insurance, digital goods, entertainment, travel, nonprofits and charities. Amazon says active merchants–which already included retailers in the United States, United Kingdom, Germany and Japan–grew more than 120% year-over-year, although it declined to release the total number of these business accounts or other figures.
“Amazon Payments brings the simplicity and familiarity of Amazon’s buying experience to our merchant customers, making it easy for millions of Amazon customers around the world to pay using the information already stored in their Amazon account,” says Patrick Gauthier, vice president of Amazon Payments.
Payments experts say Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide, is determined to build Pay with Amazon into a globally accepted brand to achieve broader reach and more value for their best customers.
“It’s certainly a nice growth number and reflects the ongoing strength of the Amazon brand in online retail,” says Thad Peterson, a senior analyst with market research and consulting firm Aite Group LLC. “They are leveraging the value of [the Amazon Prime] relationship to extend their reach to new merchants.”
The payment option connects merchants with customers who are accustomed to making online purchases, according to Amazon Payments. Consumers increasingly are shopping across multiple channels and while on the go, so the demand for convenience, speed and personalization is on the rise.
“Retailers are looking for ways to increase sales and decrease cart abandonment, and Pay with Amazon can contribute to that if the retailer can overcome their fear of Amazon stealing their information or their customer,” Peterson says.
Other key numbers for Amazon Payments for 2016:
- Mobile devices accounted for 32% of Pay with Amazon transactions. Amazon declined to provide exact volume numbers in this category.
- The average Pay with Amazon purchase was $80 in 2016, down from $84 in 2015.
- Pay with Amazon transaction volume peaked on Nov. 28, 2016, as U.S. and U.K. customers shopped on Cyber Monday.
Of the online retailers ranked in the Internet Retailer 2016 Top 1000 Guide, 68 accept Pay with Amazon as a payment method, while 461 accept PayPal. Additionally, 138 accept Google Wallet and 50 accept Apple Pay. Alipay has just two merchants on the list, which ranks online retailers by their North American web sales, but 232 e-commerce companies in the 2016 Asia 500 Guide take Alipay, signifying adoption among players in the Asian market.
According to Tom Caporaso, CEO of e-commerce platform provider Clarus Commerce LLC, PayPal is the most well-known alternative payment option in the United States, has brand awareness in Europe and is a popular payment method in emerging economies like India and Brazil. Meanwhile, Alipay, WeChat Pay, which is owned by Tencent Holdings Ltd., and even Baidu Wallet, operated by web services company Baidu Inc., are all China-based services and have the first and best chance to establish themselves as the favorite among shoppers and retailers in that country, he says.
“Whichever of those companies emerges as the clear-cut leader there will have the financial stability to fuel its global efforts,” Caporaso says. “Alipay, which appears to have the upper hand, already has a large merchant network in Europe.”
While Amazon Payments has a long way to go to catch up to more pervasive competitors like PayPal and Alipay, it has the potential to gain a foothold.
“It’s not surprising that Amazon continues to pursue this opportunity so intently. The opportunities in the online payment sector are too promising not to,” Caporaso says.
Peterson says there is room for multiple players on the payment scene and sees Amazon Payments continuing to evolve.
“Each of them are attacking the market differently,” he says. “PayPal is a ubiquitous payment brand, Alipay supports a marketplace model, and Amazon is building on the power of the Amazon brand to deepen relationships with [its] best customers.”
For Amazon, it is another way to entrench itself with customers and brands. Amazon is in constant contact with Prime members, and there is an ongoing opportunity to promote Amazon Payments among people who have proven to be particularly loyal to the Amazon “ecosystem,” Caporaso says.
This could be a strong selling point among marketplace sellers and compel some sellers to accept the payment method at checkout on their own sites. Further, Amazon Payments data will add to Amazon’s already colossal and incredibly valuable shopper profile database.
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