How Amazon is becoming a major player in finance

It was never about the books.

Jeff Bezos may have launched Amazon as an Internet book seller, but he quickly turned Amazon into an overall ecommerce powerhouse. There’s little that Amazon isn’t in to these days. Amazon still sells books but it’s also one of the leading cloud technology providers via its technology unit, Amazon Web Services (AWS), which powers both large and small clients all over the world.

Amazon also has a payments division that’s ramping very quickly. In 2013, after a couple of starts and stops, the company relaunched its payments division. Amazon Payments gave Amazon customers the ability to pay for products and services on other sites using their Amazon accounts. In a way, early Amazon Payments acted a substitute for PayPal or a credit card when Amazon account holders went shopping online. Amazon said this January that its transaction volume had grown 150 percent year over year in its payment division but hasn’t given out a full reckoning of its activities in the payments space.

Integrating Amazon Payments in the ecommerce ecosystem

Like PayPal, Amazon is running the the third party integration playbook as the next leg in its growth. Just this week at a European finance conference, Amazon announced it would enable merchants with the ability to integrate Amazon’s payment tools into their own websites.  By giving Amazon customers the ability to log in, authenticate, and pay with their Amazon account, an ecommerce site can offer the same ease and use Amazon is renown for.

This gives Amazon a much broader footprint in payments, as merchants are certainly interested in reaching the nearly 300 million registered users Amazon already has. These customers wouldn’t need to re-register or input payment information on merchant partner websites. They could just use their existing Amazon accounts and payment information on file to checkout. In turn, this would speed the conversion cycle and boost revenues for ecommerce sites that integrate Amazon Payments.

Growing out Amazon Payments beginning with leadership

To spearhead Amazon’s aggressive push into payments, the ecommerce firm hired PayPal’s Patrick Gauthier last year. He’s played a key role throughout his career in building and expanding new payment technologies. The Amazon executive was most recently at PayPal where he grew their prepaid business by 7x in 18 months as the firm’s head of product strategy in retail services. Previous to PayPal, Gauthier spent 10 years at Visa spearheading next generation payment products and services.

Gauthier now leads the expansion of Amazon Payments with merchant integrations. Regarding the program, he told Bloomberg, “Why would we make it easy for customers to buy elsewhere? Because we know it solves a problem in their life…It deepens our relationship with customers.”

Amazon’s payments distribution strategy also has its payment functionality showing up in unexpected places. The firm’s new voice-controlled virtual assistant device, Echo, recently integrated with Capital One. Users can now synch their Amazon device to track and pay their Capital One credit card bills. Amazon also developed and now markets Dash buttons which are small, one-button wifi devices that when pushed, automatically order a single product from the Amazon website.

Payments + lending

Amazon’s also been active in the online lending space. This program, which began as invite-only in 2012, provides capital to merchants who sell on Amazon. Loan sizes run from $1000 to $600,000 and terms range from 90-180 days. Payback terms can fluctuate between 6-14%. Amazon has leant out hundreds of millions of dollars as part of its lending program and in the summer of 2015, announced it had expanded its lending to select European merchants.

Amazon’s activities in the online lending and payments space have shown that that the ecommerce giant is serious about being a major player in finance. With strong roots in ecommerce, it makes sense that payments would be a smart initial foothold for the retail giant. But who knows, Amazon may move deeper into finance. Will we see the Bank of Amazon in the near future?