Amazon Using Discounts to Drive Pay Adoption

“Your margin is my opportunity” is one of Amazon founder Jeff Bezos’s most famous quotes. The retail payments sector is feeling the sting of this classic Amazon disruption strategy — offering the same service at a lower price to drive market share. Sacrificing margin has paved the way for Amazon’s dominance of online retail, much of it at the expense of offline retail.

According to an article this week in Bloomberg, Amazon is offering these same retailers discounts to adopt it’s Amazon Pay point of sale solution, a move that threatens a host of players, from traditional bank-issued payment services as well as payments disruptors like PayPal, Square and Stripe.

As the Bloomberg article notes, retail giants like Walmart already have negotiated rock bottom fees from card processors. Amazon’s latest move extends this offer to smaller merchants that have lacked the leverage to negotiate better rates. Amazon is now offering to negotiate lower fees with merchants that are willing to make long-term commitments to Amazon Pay.

When the story broke on Wednesday, the news took a bit out of the share prices for companies impacted by Amazon’s aggressive move. Visa lost 0.9%, PayPal was down 4.1%. Square ended up giving back most of its gains from the previous day. Each made some of it back on Thursday and were down slightly at this writing on Friday.

One challenge that Amazon faces in driving its payment solution into the small business space is the concern among merchants that they will be sharing critical data with their nemesis, which they fear will use it to compete against them even more effectively in the future.

Still, retailers are always eager for relief on card swiping fees, so Amazon’s move may well succeed.

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