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August 10, 2017
mm Written by:
Christian von Hammel-Bonten
Chief Product Officer
Amazon Pay Places: Not a Viable Real-Life Solution

 

In the USA, Amazon is preparing to launch its new service, Amazon Pay Places. This is a payment function which consumers can use to pre-order items like food and drink, pay via their Amazon customer accounts, and then pick up their purchases in shops. Similar services are already available in the USA, offered by businesses like Starbucks[1] and McDonald’s[2]. With the launch of Amazon Pay Places, Amazon hopes to make processing order and payment transactions more efficient for customers, and to increase retailers’ conversion rates. In doing so, the e-commerce giant is having another crack at the balancing act which is omni-channel payment, in which an online payment method makes the transition to real life. But will Amazon Pay Places be successful? In my opinion: no, it won’t.

The problem? There are two.

Problem 1. The function is not, initially, going to be integrated into partner apps. Instead, it will only be available via Amazon itself. This means that customers will have to use the Amazon app to search for services which allow them to pay using their Amazon accounts. Although the Amazon Pay button for retailer websites and apps is certainly expedient, its backwards method of operation – which involves first calling up the Amazon app, then searching there for offers from brick-and-mortar retailers, and finally paying – does not appear particularly intuitive and has not yet been successfully implemented by any payment provider. Consumers want to find their product or service and then select their payment method, not the other way round. Perhaps, though, Amazon Pay Places will be integrated into retailer apps as a payment method before too long.

Problem 2: POS payments are not (currently) supported, and, in my opinion, they won’t be successful. Why not? There is no customer benefit to using an online payment method at a point of sale. Compared to traditional German POS payment methods, such as cash or cards, Amazon Pay Places offers customers no usability benefits to encourage them to use Amazon Pay Places at points of sale. Order-ahead payment methods, like those described above, work differently – there is no need for customers to enter a 16-digit credit card number or IBAN. Instead, customers use their existing accounts, plus an email address and password (or fingerprint) to authorise purchases instantly. There are no such benefits at the POS. On the contrary: it’s quicker to pay with cash or plastic. In Germany, old habits die hard, however: ninety percent of Germans still use cash for most POS purchases, with two-thirds occasionally using their debit cards, and no more than a third using a credit card[3].

In my opinion, POS success requires an online payment method to fulfil two basic criteria: 1) It must offer a cost and/or sales advantage for the retailer, and 2) It must provide customers with a usability benefit. Only those payment methods which provide both will prevail at the POS. This, incidentally, was the stumbling block for PayPal, a payment method which is much more widespread and popular than Amazon payments, even here in Germany. Amazon Pay Places certainly doesn’t have what it takes to succeed – at least, not yet. If, however, we combine Amazon Marketplaces, Alexa, and additional Amazon Services with Amazon’s dominant market position in online retailing, a variety of ideas could be developed to offer retailers and consumers the aforementioned benefits.

 

[1] http://www.businessinsider.de/heres-how-mobile-order-and-pay-could-lift-starbucks-2016-11?r=US&IR=T

[2] https://www.marketingweek.com/2017/07/25/mcdonalds-mobile-ordering-sales-soar/

[3] http://www.faz.net/aktuell/finanzen/meine-finanzen/geld-ausgeben/deutsche-zahlen-am-liebsten-mit-scheinen-und-muenzen-15092778.html

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Tags:
e-commerce | alternative payment methods
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