Amazon's New Payment Service: Not Such a Big Deal

As my colleague Steve Symington recently laid out, Amazon.com's (NASDAQ: AMZN  ) new service "Login and Pay with Amazon" has the potential to alter the electronic payment field, particularly as it relates to PayPal.

Amazon's huge customer account database, with some 215 million accounts, is 40% larger than the eBay (NASDAQ: EBAY  ) affiliate's account resource. It's entering the market with a size advantage that ought to immediately catapult it to the forefront, while also taking a swipe at its rival, which lately has been making incursions onto Amazon's turf.

While Facebook has a database that is exponentially larger, the social network isn't geared toward making purchases, so the likelihood you'll someday "Login with Facebook" and make a purchase is infinitely smaller, particularly in light of the way the social network scoffs at privacy concerns.

And whereas Google (NASDAQ: GOOGL  ) introduced its Wallet payment service, it's largely been a failure, without much consumer acceptance on one hand and cellphone carrier limitations on the other. Google was forced to reboot the service earlier this year to try to make it more functional, but even with deployment on all major carriers, service is such that Wallet works with some phones on some carriers but not on others with the same phone. 

So this makes Amazon the immediate undisputed leader, right? Not quite. The e-commerce king does have some advantages, but because many sites that most logically would be the target base for the service could also be considered rivals to Amazon, they might not be all that keen on giving the company yet another leg up.

Both Staples and RadioShack just had that experience when they thought it would be smart to install Amazon Lockers in their stores as a means of enticing shoppers but ended up bailing after realizing it was just a one-way street.

Making sure to be home for an Amazon delivery can be a hassle, so the company offers lockers in retail locations where customers can have their package delivered. Customers are happy because they can pick up packages at their convenience, Amazon is happy to get the sale, and the retailer is happy for the small fee it receives for renting Amazon space. As a bonus, the retailer might juice sales a bit from customers who shop while collecting the package.

At least that's the theory, but that both Staples and RadioShack ended the experiment so quickly suggests those incremental sales weren't materializing and they were instead merely helping out a rival that was already stealing their business.

There might be some appeal with small retailers who would otherwise be faced with a shopper who is reticent about giving up personal and credit card data to an unknown and untested site, and Amazon, in fact, markets the service just that way. But do these shops really want Amazon peering over their shoulders, collecting all that data about their customers' spending habits to use for themselves? I doubt it.

Amazon has been down this road before with an alleged "PayPal killer" in its Checkout by Amazon payment service, which was supposed to deliver an Amazon-like checkout experience for retailers. Even with all the same factors in place then as it has now -- from a critical mass of accounts to a 1-click checkout feature anywhere on the Internet -- it was no more successful than Google Wallet was.

So don't expect retailers large or small to rush out to offer their customers Login and Pay with Amazon. If they do, they also might ultimately realize they're only creating sticky relationships with customers for their rival's benefit, and back out just as fast as the office supplies store and electronics retailer did.

eBay's PayPal, which doesn't have such conflicts, represents a more attractive means for engaging customers. It might not have the same numbers as Amazon.com, but retailers also won't feel as though they're buying the rope from the same company that's trying to hang them.

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