From e-commerce to e-wallet: Amazon?s potential

By Raunak Haldipur

In 2016, Amazon India had applied for a Prepaid Payment Instrument (PPI) licence from RBI. In simple terms, the permission to launch an e-wallet. This licence was then granted to Amazon in March 2017. Now, Amazon can directly compete with e-wallets like Paytm and Freecharge.

In December 2016, Amazon launched a service called Amazon Pay. However, it was only restricted to Amazon users and could be used for transactions only on Amazon. Amazon Pay worked in tandem with their gift card service which was in partnership with Qwikcilver. With their PPI licence, Amazon will now become like any mobile or e-wallet which will integrate the gift card balance to the wallet service.

Takeaways from Flipkart’s PhonePe

Through the wallet service, Amazon aims to make the customer’s payment experience seamless by bypassing the two-step verification which is a little cumbersome for users who frequently shop online.

In September 2016, PhonePe, a company owned by Flipkart launched an app based on the Unified Payment Interface (UPI). This app directly works out of the customer’s bank account. UPI is a robust payment system that the National Payments Corporate of India (NPCI) has launched. The transaction failure rates in UPI are really low and the customer need not fill any money into any wallet for making the transactions. The app already has over 10 million users. It has also launched a new feature called ‘Pay on Delivery’ using PhonePe instead of cash on delivery. Amazon can also provide this feature with their wallet if required.

Drawbacks of online payment

The online payment methods using debit cards, credit cards and internet banking are less efficient since they involve banks and third-party payment gateways. This results in frequent payment failures, sometimes almost up to 30%. Customers are often routed to the bank’s website to fulfil the transaction. With their new wallet service, Amazon customers can bypass the two-factor authentication for their online purchases and use it like any other digital wallet.

Will Amazon’s payment bet pay off?

Paytm started off as a payment wallet and has now turned into an e-commerce store. Amazon too seems to be on the same path. As per PricewaterhouseCoopers 2016 report on payments in India, 96% of the transactions in the country are in cash. This shows a huge market potential and makes the future of payments in India a lucrative one.  As a result of which many players have stepped into the market, especially big players like Amazon, Flipkart and very soon WhatsApp.

Amazon is heavily betting on their payments wallet and has invested Rs. 130 Crores in Amazon Pay in India. In the last two months, Amazon has pumped in Rs. 2,000 Crores in their Indian business in order to consolidate their market position. Currently, Amazon is also running an Independence Day sale in India where they are offering exciting cash back to people who are making transactions using Amazon Pay. Amazon is continuing to pump in a lot of money in India, but only time will tell whether their payments bet in India will pay off.

Featured Image Source: Flickr