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Amazon challenges PayPal with one-click Checkout news
31 July 2008

Amazon has set out to take on eBay by unveiling an online payment service which will compete directly with the latter's popular offering PayPal. The new service, called Checkout by Amazon, will give online retailers the option of having Amazon manage their payments and allow them to avoid having to register customers afresh.

Sites which adopt the service will be able to use details such as billing and address information that their customers have already logged with Amazon. They will also be able to offer the same 'one-click purchase' as Amazon, as well as other Amazon features, such as order tracking.

"Customers will be coming through an experience that is really similar to Amazon's," said Mark Stabingas, vice president of Amazon Payments. "People will like the familiarity and comfort associated with that."

For both services, Amazon charges a transaction fee that starts at 2.9 per cent of the order amount, plus 30 cents per order (it goes down to 1.9 per cent for sites doing more than $100,000 a month in sales). And for transactions less than $10, Amazon charges 5 per cent plus 5 cents.

Amazon already offers the Amazon Flexible Payment Service, a developer-oriented money-transfer application programming interface that Amazon opened to public testing in August 2007, and Amazon Dev Pay, a billing and account management service designed to make it easy to pay developers for work done on Amazon Web Services applications.

Checkout and Simple Pay are aimed squarely at businesses that may not have the resources or time to build their own payment service using Amazon's Flexible Payment Services API. Amazon is going after PayPal and Google Checkout by leveraging its own payment software (and the millions of existing accounts tied to its system) and making it available to others.

PayPal has built up a strong reputation as a trusted and secure service and now accounts for more than a quarter of eBay's total revenues, bringing in $602 million in the most recent quarter. Analysts said that the possibility of offering customers a one-click purchase button may well entice some sites to offer Amazon as an alternative, however. 

PayPal charges on a sliding scale, starting at 2.9 per cent plus 30 cents per transaction for monthly sales up to $3,000. Merchants generating more than $100,000 in monthly sales are charged 1.9 per cent plus 30 cents per transaction.

It remains by far the most popular payment service, but does not offer one-click purchase. Online retailers using the system will typically display a 'buy now' button which, when clicked, takes the customer to a PayPal site where he or she has to enter a user name and password. Amazon's service promises to allow other retailers to sell goods with one click.

In the past couple of years, Amazon has expanded its reach far beyond the sales of books, CDs and clothing for which it is best known. In September, the site - which is used by 80 million people worldwide - launched its long-awaited music download service, which competes directly with Apple's iTunes.

Two years ago, it launched an online storage service which allows customers to store documents, photos and other information on the web for 15 cents per gigabyte per month.

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Amazon challenges PayPal with one-click Checkout