How Amazon affects payments
Working for e-commerce customers, we, in the Fondy payment service team , cannot ignore the global trends set by the global eCommerce leader Amazon. The author of the material tells how the technological development of Jeff Bezos’s company influences the payment industry adjacent to e-commerce.
We talk a lot about the impact of the “Amazon effect” on traditional retail failures: the closure of offline stores. And we lose sight of the very different “Amazon Effect”, which may turn out to be even more revolutionary. At the recently held conference of The Innovation Project, Amazon’s vice president of payments, Patrick Gautier, said that the company is thinking about changing the shopping interface that goes far beyond the Buy button. Potentially, this will make the company a key link in making purchases anywhere. And the most familiar and natural interface for people will be used - the voice.
No, it's not about the digital payment methods that you think about all the time. Another story related to the “Amazon Effect” is the story of its impact on payments.
')
And now a little more.
The classic sad stories of half-dead retail sellers are well known to everyone. But there are a couple of moments that are worth talking about separately.
This is the story in which Amazon appears as a powerful online force. However, in the story, the narrator insists on the last hope that is given by these estimates of retail sales of e-commerce in the United States. In particular, the figures from the latest report indicate that about 92% of retail sales are still made in regular stores. And many are happy to repeat them, even despite the information about the mass closure of shops due to the drop in pedestrian traffic (by some estimates up to 50% compared to 2010), and to the numbers in the red colored annual reports on profits in traditional retail.
Estimating offline retail greatly underestimates online sales. In some product categories, the difference between offline and online sales is staggering. Books, office supplies, clothing and sporting goods - all of these categories in online sales are close to 30, 40 and even 60% compared to sales in offline retail. Even food sales have gone online, although it has to be admitted that this is a growth of only 1% for 2016. But it is assumed that in the future growth will be expressed in double digits, as the online purchase with home delivery of bulky goods like toilet paper and detergents will become more convenient to shop at a regular store.
Partly in these changes, the effect of Amazon in retail is guilty. And since each story needs a protagonist, it’s easy to imagine Amazon on this spot. However, the real background of the whole story is one simple fact: in reality, retail no longer gives buyers a reason to go shopping. Previously, stores served as showrooms of the best and newest products. Now they have become cemeteries of unsold items - goods that no one will buy until their price becomes ridiculous. Consumers no longer have an incentive to go to the store, because there is nothing new there that you can see and buy. So why bother?
It is logical that the owners of good brands think the same thing - “Why bother?”, And shift the focus of attention to those areas where the audience goes shopping.
In some cases, these are their own brand stores or websites, where they have full control over their merchant experience and merchandising. The model of direct sales to customers is rapidly gaining popularity, and 40% of manufacturers are already using this model to reach their consumers.
And this process involves a lot of new digital marketplaces that have become modern department stores: sites such as Net-A-Porter, FarFetch and Moda Operandi, combine different brands together and offer new ready-made outfits in their virtual showcase every day.
And there's Amazon.
And anyone who still sincerely believes that the designer is more likely to cut off his finger than to sell his stuff on Amazon should look at Amazon Fashion . There are many modern designer brands like Michael Kors, Stuart Weitzman, Ray Ban, Vince, Theory, Rebecca Minkoff, J Brands, True Religion - and this is only a small part. Right here, on Amazon Fashion, they sell the same things as on their own sites and in their stores.
All this, of course, happens just when online sales are growing at a threefold faster rate compared to store sales — according to the survey data , their growth was 14.3% versus about 4% of store sales growth. Of course, this is the rapid growth of a small sector, only this sector, as mentioned earlier, brings a lot of suffering to certain retail areas. Because online is growing due to the fall in operating profit of regular retail. According to some estimates , it eats up to 25%.
In parallel with this, Amazon seems to be monopolizing online sales. In 2016, the company accounted for 53% of the total growth rate and 43% of the total volume of all online sales.
Amazon is also changing the way consumers think about what a retail service should be. Take, for example, Amazon Prime users. They receive their order within two days with free shipping. Free shipping in traditional retail is not really free - you have to pay twice as much waiting for it as Amazon does. Therefore, it is not surprising that more and more consumers begin their shopping route from here. Our survey of 2,000 consumers in 2015 showed that 55% of them began their search from Amazon. It is quite logical to expect that in 2016, these figures are much over 60%.
Moreover, Amazon Payments went on a campaign from Amazon to other online retail sites to provide consumers with all the convenience of paying in one click. Sites that accept payment through Amazon, according to our latest estimates, make up 10% in the TOP 1000 online stores. So they simplify the payment process, allowing you to log in through the usual Amazon. The buyer does not need to register on the seller’s website, and by the time the user wants to pay for the purchase, he is just one click away from the final. After all, Amazon has long known the map data and shipping address.
And all this goes in parallel with the formation of a new Amazon voice ecosystem, which bears the name Alexa (Alex). It is assumed that it will completely change the customer experience. Alexa and its ecosystem are needed not only to enable shopping at any place where voice activation is possible. Its goal is to add more context and interactive interactivity to the buying process. Important changes will pass unnoticed, changing the perception of both consumers and sellers in the face of brands.
Alexa takes the shopping environment to a whole new level. It transforms it into a system of relationships between the consumer and the brand from which the buyer wants to purchase goods using a friendly interface called Alex. Alexa does not create a dialogue between the consumer and the website. And not even between the consumer and the Amazon site. She creates a dialogue between the user and Alex about what the user wants to buy.
"Hello, Alex, I want to buy a pair of black suede loubutenov on an eight-centimeter heel, size 35, who has such?".
“Hi, Karen, (she already knows my voice print), they are on sale at Saks in Boston, you can pick them up today. Neiman's has heels higher, they can be sent tomorrow. They are also on ChristianLoubouten.com, and if you order them today, they will be sent free tomorrow morning. Which option do you prefer? ”
In this scenario, where Alexa is involved, Neiman's, Saks and Louboutin stores do not even need to put their goods on Amazon or place an Amazon button on their websites. All they need is an appropriate “ skill ” or “skill” in the Alexa ecosystem.
And if consumers want to shop with Alexa, why should retailers refuse?
And here begins the effect of Amazon in the field of payments.
Alexa is becoming the voice of an increasing number of devices: at home it's Echo and Dot, on the road Amazon Tap, and in the car and in the browser.
One of the last weeks Alexa appeared in the Amazon application for the iPhone, which is one of the most frequently downloaded and used applications on the App Store.
Bank RBC Capital Markets a few weeks ago published a report assessing the size of the Amazon Alexa market. According to their calculations, by 2020 there will be 128 million Alexa Echo, Dot and Tap devices and 500 million Alexa users using these devices. And this does not include those who will use Alexa through applications in the machine, browsers, in the Amazon application itself, and on other platforms, both hardware and software, which will most likely appear in these three years. Alexa is a real locomotive. Just two years ago, Alexa had no more than a thousand “skills,” last year at the same time, already five thousand, now more than eleven.
But the most important thing, according to RBC, is that all these users will make purchases using Alexa.
Part of their analytical work RBC experts have devoted a survey of buyers on Amazon about their interest in using Alexa to make purchases. It turned out that 17% of respondents are already doing this. Most likely, in most cases we are talking about delivering food and buying simple things from Amazon itself. According to RBC, the share of sales through Alexa will only grow and will lead to an additional increase in sales among the existing Amazon audience by 15%, simply because it's easier to buy. They estimate this additional increase at $ 5 billion a year.
This is $ 150 million more than the entire annual income of Under Armor in 2016.
And this is without taking into account the possibility that Alexa will start using, at least purely out of interest, those who use Amazon for a quick payment.
How does this relate to payments, you ask? It depends on who will answer.
If you are an issuer or a card brand (such as Visa, Mastercard, China UnionPay, etc.), you probably aren’t particularly worried yet. But think about this. Amazon users register their cards and, wherever Amazon and Alexa go, the card data will be sent there, and there they will be used for purchases.
If you are one of the players in the payments market, you already have to worry. Especially now, when it became quite obvious that Amazon and Alexa intend to bring sellers and buyers together wherever they might want to do business. Remember how everyone was worried about Apple, who took on the role of a big and evil overseer of payments and sales? Now Amazon is becoming such an influential intermediary.
Think about how everyone is accustomed to using Amazon outside of the service itself? Just with amazonovskiy authorization. How to order pizza Dominos using Alexa? Registering an account first on Amazon. The same account, which still does not include mobile wallets of payment services, which would like to see Apple, Android, Samsung and PayPal as a tool for buying pizza in Dominos.
Amazon, like any other vendor or trading services platform, will make its own decisions regarding payment methods. It will proceed from which methods provide added value in the context of customer experience and simplify the buying process. The same applies to retailers. If consumers do not use payment services for online purchases — and they do not use them, with the exception of PayPal — they will not notice that an Amazon or Alexa account does not offer them this opportunity. And retailers will be all the same.
But there is one exception - another player on the letter A.
On-site Alipay, it would be sensible to find a short-term rental option in Seattle and not leave the city until Amazon signs an agreement to include Alipay in the list of possible payment options within the service. For Alipay, this is a real victory, which is so necessary for Chinese consumers who are looking for an alternative to Alibaba for wasting free money.
For Amazon, this is the fastest way to get a billion buyers. Amazon now has 300 million of its own, plus 450 million from Alipay, plus hundreds of millions of users of other services that work through Alipay. For example, Indian Paytm. And they all want to buy and spend their money online. This is also an option for Amazon to enter China through the back door, provided by the strongest Chinese company, which has problems with going beyond China. In addition, Alipay, feeling threatened in the face of MoneyGram, may want to write himself extra points in the column of winning points.
Of course, access to these consumers is another incentive for sellers to work with Amazon - on the Amazon site itself, outside of Amazon and through Alexa. New consumers with free money - this is exactly what the doctor ordered.
The picture of the future for payment systems is still vague. For Amazon, they represent only a thin strip between payment cards already registered in your account and a one-click purchase.
Some believe that the real threat to Amazon’s payment systems is that it can replace payment cards registered in the system with demand deposit accounts (DDA accounts). Hardly so. Why create barriers for consumers when it is possible to create difficulties for card networks and issuers in order to conclude contracts on more favorable terms?
You don’t need to go far for an example - look at the Amazon Prime Card under the Visa brand, which is manufactured by Chase and works at ChaseNet.
An attractive-looking card with great cashback offers. Considering the circumstances of the Visa and Chase deal, Amazon probably negotiated excellent conditions for itself. The conditions that became an integral part of the deal between Chase and Visa for a period of ten years, and were adopted 4 years ago. Conditions that are likely to serve as an important argument in the negotiations between networks, payment systems and Amazon over the next three to five years. Conditions that will almost certainly include tariffs that are close to what Apple installed when Apple Pay was launched. And this is probably the new business model in which Saks wins over Neiman's from the example above. The model will be financed by the issuer or the card network. And will determine the vector of development of commerce in the next 10 years.
Unless, of course, Amazon has a new serious rival. But today, despite the presence of several players with the potential, assets and scale that allow you to change the course of the game, there is silence in this sector. If you are reading this and are one of them, perhaps now is the best time to tell the world about your plans. Otherwise, of all the commercially profitable sectors, only those parts of the cosmos will remain that Jeff Bezos did not chase after. After all, Mars and the Moon are already busy.
We talk a lot about the impact of the “Amazon effect” on traditional retail failures: the closure of offline stores. And we lose sight of the very different “Amazon Effect”, which may turn out to be even more revolutionary. At the recently held conference of The Innovation Project, Amazon’s vice president of payments, Patrick Gautier, said that the company is thinking about changing the shopping interface that goes far beyond the Buy button. Potentially, this will make the company a key link in making purchases anywhere. And the most familiar and natural interface for people will be used - the voice.
No, it's not about the digital payment methods that you think about all the time. Another story related to the “Amazon Effect” is the story of its impact on payments.
')
And now a little more.
Amazon effect in retail
The classic sad stories of half-dead retail sellers are well known to everyone. But there are a couple of moments that are worth talking about separately.
This is the story in which Amazon appears as a powerful online force. However, in the story, the narrator insists on the last hope that is given by these estimates of retail sales of e-commerce in the United States. In particular, the figures from the latest report indicate that about 92% of retail sales are still made in regular stores. And many are happy to repeat them, even despite the information about the mass closure of shops due to the drop in pedestrian traffic (by some estimates up to 50% compared to 2010), and to the numbers in the red colored annual reports on profits in traditional retail.
Estimating offline retail greatly underestimates online sales. In some product categories, the difference between offline and online sales is staggering. Books, office supplies, clothing and sporting goods - all of these categories in online sales are close to 30, 40 and even 60% compared to sales in offline retail. Even food sales have gone online, although it has to be admitted that this is a growth of only 1% for 2016. But it is assumed that in the future growth will be expressed in double digits, as the online purchase with home delivery of bulky goods like toilet paper and detergents will become more convenient to shop at a regular store.
Partly in these changes, the effect of Amazon in retail is guilty. And since each story needs a protagonist, it’s easy to imagine Amazon on this spot. However, the real background of the whole story is one simple fact: in reality, retail no longer gives buyers a reason to go shopping. Previously, stores served as showrooms of the best and newest products. Now they have become cemeteries of unsold items - goods that no one will buy until their price becomes ridiculous. Consumers no longer have an incentive to go to the store, because there is nothing new there that you can see and buy. So why bother?
It is logical that the owners of good brands think the same thing - “Why bother?”, And shift the focus of attention to those areas where the audience goes shopping.
In some cases, these are their own brand stores or websites, where they have full control over their merchant experience and merchandising. The model of direct sales to customers is rapidly gaining popularity, and 40% of manufacturers are already using this model to reach their consumers.
And this process involves a lot of new digital marketplaces that have become modern department stores: sites such as Net-A-Porter, FarFetch and Moda Operandi, combine different brands together and offer new ready-made outfits in their virtual showcase every day.
And there's Amazon.
And anyone who still sincerely believes that the designer is more likely to cut off his finger than to sell his stuff on Amazon should look at Amazon Fashion . There are many modern designer brands like Michael Kors, Stuart Weitzman, Ray Ban, Vince, Theory, Rebecca Minkoff, J Brands, True Religion - and this is only a small part. Right here, on Amazon Fashion, they sell the same things as on their own sites and in their stores.
All this, of course, happens just when online sales are growing at a threefold faster rate compared to store sales — according to the survey data , their growth was 14.3% versus about 4% of store sales growth. Of course, this is the rapid growth of a small sector, only this sector, as mentioned earlier, brings a lot of suffering to certain retail areas. Because online is growing due to the fall in operating profit of regular retail. According to some estimates , it eats up to 25%.
In parallel with this, Amazon seems to be monopolizing online sales. In 2016, the company accounted for 53% of the total growth rate and 43% of the total volume of all online sales.
Amazon is also changing the way consumers think about what a retail service should be. Take, for example, Amazon Prime users. They receive their order within two days with free shipping. Free shipping in traditional retail is not really free - you have to pay twice as much waiting for it as Amazon does. Therefore, it is not surprising that more and more consumers begin their shopping route from here. Our survey of 2,000 consumers in 2015 showed that 55% of them began their search from Amazon. It is quite logical to expect that in 2016, these figures are much over 60%.
Moreover, Amazon Payments went on a campaign from Amazon to other online retail sites to provide consumers with all the convenience of paying in one click. Sites that accept payment through Amazon, according to our latest estimates, make up 10% in the TOP 1000 online stores. So they simplify the payment process, allowing you to log in through the usual Amazon. The buyer does not need to register on the seller’s website, and by the time the user wants to pay for the purchase, he is just one click away from the final. After all, Amazon has long known the map data and shipping address.
And all this goes in parallel with the formation of a new Amazon voice ecosystem, which bears the name Alexa (Alex). It is assumed that it will completely change the customer experience. Alexa and its ecosystem are needed not only to enable shopping at any place where voice activation is possible. Its goal is to add more context and interactive interactivity to the buying process. Important changes will pass unnoticed, changing the perception of both consumers and sellers in the face of brands.
Alexa takes the shopping environment to a whole new level. It transforms it into a system of relationships between the consumer and the brand from which the buyer wants to purchase goods using a friendly interface called Alex. Alexa does not create a dialogue between the consumer and the website. And not even between the consumer and the Amazon site. She creates a dialogue between the user and Alex about what the user wants to buy.
"Hello, Alex, I want to buy a pair of black suede loubutenov on an eight-centimeter heel, size 35, who has such?".
“Hi, Karen, (she already knows my voice print), they are on sale at Saks in Boston, you can pick them up today. Neiman's has heels higher, they can be sent tomorrow. They are also on ChristianLoubouten.com, and if you order them today, they will be sent free tomorrow morning. Which option do you prefer? ”
In this scenario, where Alexa is involved, Neiman's, Saks and Louboutin stores do not even need to put their goods on Amazon or place an Amazon button on their websites. All they need is an appropriate “ skill ” or “skill” in the Alexa ecosystem.
And if consumers want to shop with Alexa, why should retailers refuse?
And here begins the effect of Amazon in the field of payments.
Amazon Effect in Payments
Alexa is becoming the voice of an increasing number of devices: at home it's Echo and Dot, on the road Amazon Tap, and in the car and in the browser.
One of the last weeks Alexa appeared in the Amazon application for the iPhone, which is one of the most frequently downloaded and used applications on the App Store.
Bank RBC Capital Markets a few weeks ago published a report assessing the size of the Amazon Alexa market. According to their calculations, by 2020 there will be 128 million Alexa Echo, Dot and Tap devices and 500 million Alexa users using these devices. And this does not include those who will use Alexa through applications in the machine, browsers, in the Amazon application itself, and on other platforms, both hardware and software, which will most likely appear in these three years. Alexa is a real locomotive. Just two years ago, Alexa had no more than a thousand “skills,” last year at the same time, already five thousand, now more than eleven.
But the most important thing, according to RBC, is that all these users will make purchases using Alexa.
Part of their analytical work RBC experts have devoted a survey of buyers on Amazon about their interest in using Alexa to make purchases. It turned out that 17% of respondents are already doing this. Most likely, in most cases we are talking about delivering food and buying simple things from Amazon itself. According to RBC, the share of sales through Alexa will only grow and will lead to an additional increase in sales among the existing Amazon audience by 15%, simply because it's easier to buy. They estimate this additional increase at $ 5 billion a year.
This is $ 150 million more than the entire annual income of Under Armor in 2016.
And this is without taking into account the possibility that Alexa will start using, at least purely out of interest, those who use Amazon for a quick payment.
How does this relate to payments, you ask? It depends on who will answer.
If you are an issuer or a card brand (such as Visa, Mastercard, China UnionPay, etc.), you probably aren’t particularly worried yet. But think about this. Amazon users register their cards and, wherever Amazon and Alexa go, the card data will be sent there, and there they will be used for purchases.
If you are one of the players in the payments market, you already have to worry. Especially now, when it became quite obvious that Amazon and Alexa intend to bring sellers and buyers together wherever they might want to do business. Remember how everyone was worried about Apple, who took on the role of a big and evil overseer of payments and sales? Now Amazon is becoming such an influential intermediary.
Think about how everyone is accustomed to using Amazon outside of the service itself? Just with amazonovskiy authorization. How to order pizza Dominos using Alexa? Registering an account first on Amazon. The same account, which still does not include mobile wallets of payment services, which would like to see Apple, Android, Samsung and PayPal as a tool for buying pizza in Dominos.
Amazon, like any other vendor or trading services platform, will make its own decisions regarding payment methods. It will proceed from which methods provide added value in the context of customer experience and simplify the buying process. The same applies to retailers. If consumers do not use payment services for online purchases — and they do not use them, with the exception of PayPal — they will not notice that an Amazon or Alexa account does not offer them this opportunity. And retailers will be all the same.
But there is one exception - another player on the letter A.
On-site Alipay, it would be sensible to find a short-term rental option in Seattle and not leave the city until Amazon signs an agreement to include Alipay in the list of possible payment options within the service. For Alipay, this is a real victory, which is so necessary for Chinese consumers who are looking for an alternative to Alibaba for wasting free money.
For Amazon, this is the fastest way to get a billion buyers. Amazon now has 300 million of its own, plus 450 million from Alipay, plus hundreds of millions of users of other services that work through Alipay. For example, Indian Paytm. And they all want to buy and spend their money online. This is also an option for Amazon to enter China through the back door, provided by the strongest Chinese company, which has problems with going beyond China. In addition, Alipay, feeling threatened in the face of MoneyGram, may want to write himself extra points in the column of winning points.
Of course, access to these consumers is another incentive for sellers to work with Amazon - on the Amazon site itself, outside of Amazon and through Alexa. New consumers with free money - this is exactly what the doctor ordered.
The picture of the future for payment systems is still vague. For Amazon, they represent only a thin strip between payment cards already registered in your account and a one-click purchase.
What will the effect of Amazon do with payments?
Some believe that the real threat to Amazon’s payment systems is that it can replace payment cards registered in the system with demand deposit accounts (DDA accounts). Hardly so. Why create barriers for consumers when it is possible to create difficulties for card networks and issuers in order to conclude contracts on more favorable terms?
You don’t need to go far for an example - look at the Amazon Prime Card under the Visa brand, which is manufactured by Chase and works at ChaseNet.
An attractive-looking card with great cashback offers. Considering the circumstances of the Visa and Chase deal, Amazon probably negotiated excellent conditions for itself. The conditions that became an integral part of the deal between Chase and Visa for a period of ten years, and were adopted 4 years ago. Conditions that are likely to serve as an important argument in the negotiations between networks, payment systems and Amazon over the next three to five years. Conditions that will almost certainly include tariffs that are close to what Apple installed when Apple Pay was launched. And this is probably the new business model in which Saks wins over Neiman's from the example above. The model will be financed by the issuer or the card network. And will determine the vector of development of commerce in the next 10 years.
Unless, of course, Amazon has a new serious rival. But today, despite the presence of several players with the potential, assets and scale that allow you to change the course of the game, there is silence in this sector. If you are reading this and are one of them, perhaps now is the best time to tell the world about your plans. Otherwise, of all the commercially profitable sectors, only those parts of the cosmos will remain that Jeff Bezos did not chase after. After all, Mars and the Moon are already busy.
Source: https://habr.com/ru/post/322792/
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