First, there was Prime. And now, Amazon Pay.
Amazon launched pay in India in April 2017. A payment option that lets users store their card information, it also doubles up as a wallet. One year in, Amazon is doubling down on it. Just like other wallet players, it has been offering heavy cash backs. Amazon invested Rs 195 crore ($29.31 million) in Pay this March and Rs 457 crore ($68.69 million) last year. That’s a lot of money. More when you realise that this is Amazon’s second attempt. Long back, when e-commerce wasn’t such a big deal, in October 2014, Amazon brought to India the payment option called Pay with Amazon. It bombed. Early last year, it was quietly taken out.
Pay, however, is inching forward slowly but surely.
In the last few months, Amazon has opened up pay to other merchants, allowing them to pay for food delivery services, travel, and movie tickets. So it is no longer restricted to buyers on Amazon. It is a curious move, which suggests that Amazon isn’t looking at Pay as an incremental convenience for its customers. No. It is looking at staying with customers even when they are not shopping on Amazon. Something that other wallet players, like Paytm, MobiKwik and FreeCharge have done. Some better than others.
Mahendra Nerurkar, director of Amazon Payments, says the answer lies in need. “External payments is a bold frontier,” he says. “The tilt on India is we have been targeting high-frequency use cases while in other geographies it has mostly been e-commerce use cases.”
That’s a good way to put it. The other way to put it is that Amazon is dogfooding. It is a common Silicon Valley practice, where a product is tested internally before being thrown open for use by others. We saw that with PayPal and eBay, where the payments product PayPal was used exclusively for purchases on the e-commerce site eBay before eventually moving to a separate vertical for payments. But Amazon takes it a level further. First, it uses the product. Then it rolls it out to others and makes it a business. Then, it lets people experience its product on other merchant sites who could then potentially become Amazon users, completing the circle.
A good way to understand Amazon’s dogfooding is to look at Amazon Web Services (AWS). Set up internally to allow Amazon to rapidly scale its e-commerce operations, now, when this infrastructure is being offered as a service to others, it doesn’t just add a revenue windfall—a run rate of $20 billion—but a treasure trove of organisational insight as well.
“For e-commerce to work at scale, pre-paid digital payments (paying for it before it is delivered) is an imperative,” says Nerurkar.