Amazon Piloting Palm Readers in Amazon Go Stores

The initial vision of Amazon as a bookseller is in the rearview mirror, as the company made it to the top of electronic commerce. My first purchase at Amazon was the kid’s classic, “Goodnight Moon,” which dates back to March 2003, and since then, my purchasing has included everything from auto accessories to pool filters and window dressings. While the book shows signs of passing through the grubby hands of children, and the original recipient is far past her college graduation, it remains a reminder of Amazon’s early days. Indeed, Amazon has gone beyond its objective to be the “everything store.” What is the Amazon payment strategy?

While most of my Amazon purchases stem from the Chase Amazon Visa card, which rewards me with a whopping 5% cash-back, Amazon is involved in an array of payment options that extend into central bank digital purchases, installment lending, and business procurement. It is quite a distance from the original mission, and if your household is like mine, you found Amazon as a critical resource during COVID. Amazon delivery trucks are on my street twice a day, even now.

But payments drive commerce, and Amazon is deep into the mix on important long-range topics. While Amazon One is cool and interesting, the current impact in face-to-face sales is somewhat anecdotal.  While the payment form may gain traction in years ahead, Amazon is hyper-focused on three important payment trends today:  digital currencies, installment lending options (BNPL), and B2B procurement.

While crypto-currencies can bring the creeps to conservative bankers because of limited audit trails and unstable values, when you put a central bank behind the process, there is an entirely different value proposition. While the U.S. Federal Reserve is in its early stages on this matter, the European Central Bank (ECB) is actively testing CBDCs with Amazon at the forefront of online commerce. The ECB approaches the topic from multiple angles, including Amazon. Other companies include “Nexi and Worldline, Spain’s CaixaBank (CABK), and the European Payments Initiative, a consortium of euro-area banks,” according to Coinbase. According to the article, a digital euro “could be issued in 2026.”

BNPL take-up took an interesting course from the Scandinavian region to Australia, then Europe, and the rest of the world. The idea was not novel—companies like Household Finance and GECC built their business around merchant financing options. What BNPL did, though, was to invert the payments focus from a consumer enabled with a credit card to a merchant enabled with a payment option. Amazon recently aligned with Affirm for this option and is using the functionality in the U.S. While Affirm certainly has had some bumps in the road, the firm has solid footing, understands capital markets, and is in payments to stay, unlike many traditional BNPL firms.

While Shopify and Amazon toil about whether it should be Shop Pay or Buy With Prime, the bigger picture is that business procurement is a massive space for payments, which Amazon discusses in their 2022 State of Procurement Report.

As Amazon leaped beyond Margaret Brown’s classic book—and the credit card I used to buy it 20 years ago—there is certainly more ahead, and Amazon will be there, A to Z.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group.

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