Sunday, September 09, 2007

Amazon's Flexible Payments service

This is the best explanation of Amazon's new payment system I've read ...
Mobile Opportunity: Impact of Amazon Flexible Payments Service: Computing as a utility

... FPS is a web service, meaning it's a set of online APIs that the creator of a website or web application can use to perform tasks. What FPS does for you is billing -- you can use it to accept payments for something you sell online. Basically, you transmit the customer's info to Amazon, and they take care of the credit check, credit card processing, billing, and so on. They send you the money, less a percentage cut that they take. That's not at all revolutionary. PayPal and Google Checkout offer the same thing already. Amazon's cut is about the same as PayPal -- about 2% to 3% of your revenue, depending on the amount of business you do, plus 30 cents per transaction.

Google is a tad cheaper, plus you get AdSense credits for using it. (For more information on FPS, there are good articles here and here). What impressed me about FPS is its flexibility. Amazon says you can set different payment terms for every customer, set up subscriptions and multiple payment schedules, manage a store in which you pass payments from a customer to your suppliers, set up either pre- or post-payment systems, and most importantly you can manage micropayments down to a couple of pennies per transaction ..."
Mace talks about the other implications for online commerce -- it's well worth a read. Google checkout is not available internationally, so if Amazon can extend this outside the US it could be a real winner -- esp. for selling software. It's a big deal because, like Google Checkout, it seems to work around the high transaction costs that credit card companies charge, thus allowing small charges to be cost-effective.

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