Amazon.com Inc (NASDAQ:AMZN) is looking to transfer the discounts it receives on credit card fees to retailers provided they take part in its Amazon Pay online payment service, according to a report by Bloomberg.
This switch in strategic thinking underlines the way in which Amazon will forfeit the profitability and proprietary nature of its payment system to increase its use, Bloomberg said. The move poses a threat to PayPal and other banks issuing credit cards.
Swipe fees are a business worth tens of billions of dollars per year as lenders, card networks like Visa (NYSE:V) and Mastercard (NYSE:MA) and payment processors such as First Data earn a fraction on every sale when consumers use credit cards to pay.
The fees being split among lenders, payment processors and the card companies are typically about 2% of a credit card transaction. Larger retailers like Amazon pay lower rates due to their gigantic sales figures.
Moshe Katri, an analyst with Wedbush, thinks Amazon’s new efforts are aimed at targeting the merchant processing space since it is offering to take on a portion of the merchant discount fee charged per card transaction in return for retailers using Amazon’s payments processing services.
Amazon shares were flat at US$1,563.90 in pre-market trade.