Amazon.com, Inc (NASDAQ: AMZN) has been rolling out new efficient measures, which have been threating to areas such as delivery affecting FedEx and UPS sales. In addition, Amazon intends to rollout a new payment system to offer retailers discounts from credit card fees, which could affect big names such as Paypal Holdings Inc., JP Morgan Chase & Co., Citi Group Inc., Mastercard Inc. and Visa Inc. to name a few.
Swipe fees are a USD$90 billion a year business for companies such as JPMorgan Chase & Co. , Citigroup Inc., and networks such as Mastercard Inc. and Visa Inc. and payment processors like First Data Corp. and Stripe Inc., who earn a portion when customer swipe their cards or click “buy now”. Furthermore, credit card transaction fees amount to about 2 percent and .24 cents for debit cards, but big stores such as Amazon and Walmart have negotiated for lower rates based on their large sales volume daily. However, Amazon is willing to forfeit profitability for a long-term gain acting as a so-called payments facilitator like Paypal by exporting or offering to pass this discount to its merchants who agree to take on the Amazon Pay service.
As a result, this means Amazon will group its smaller merchants to help them reduce the cost of accepting electronic payments. Furthermore, since Amazon’s announcement, Paypal shares dropped 4.1 percent on Wednesday, erasing most of its gains of 3.7 earlier in the year. Visa also fell 0.9 per cent.
Moreover, The drawback to this is that many small merchants are sceptical about divulging certain information with Amazon, which may compete with them to sell similar products on its own site. Amazon operations’ main intention is to get a piece of other retailer’s e-commerce revenue to becoming the ultimate one-stop shop.
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