~2025: Stripe becomes Amazon SBS — Simple Billing Service
replies(7):
(Alternatively, one might say Amazon simply is large enough to eat up the cost of fraud...)
Amazon is doing its own fintech play here, with heavy investments into Amazon Pay, Amazon Credit cards, and more. None of that seems to be driven via Stripe, but other local partners and banks instead.
You got to give something in return. In this case I think both parties have something that the other side wants so why not?
But yeah I understand that today is a bit of the culture of tech companies to be unreliable, was just thinking about it today, I had few updates on iPhone apps, and all the apps didn't have any explanation, just trying to be funny about having fixed bugs, but no details, software engineering is a bit of a joke nowadays, and I think it's not just software engineering but it's just that companies are a joke, no explanation to customers, not explanation to users, no support etc.
I'm all-in on AWS and I've drank the kool-aid so I'm obviously biased but I've quite enjoyed living in the AWS walled garden. Stripe is one of 1-2 external services I use, bringing that "in house" would be nice, especially if CDK had full support for creating merchants/etc.
From a data perspective, it would seem that there would be some major implications for this particular deal. If Stripe can gain a window into the purchasing habits and volumes of Amazon’s massive customer base (not the actual items, but the size and frequency), it seems like it’d be a major boost to the depth and breadth of its machine learning models. For Amazon to give that sort of capability to another company — which seems to have begun a few years back — seems quite remarkable to me.
On this same line of thought, I would assume that Apple has been working to bring more and more of its payment infrastructure in-house, as it’s a major area of data leakage (regardless of whether the data is merely used to train fraud prevention models, or to do something more “interesting”). Maybe someone with actual knowledge on these matters will comment here…
I know this is a PR piece, but shouldn't a CTO know better? What could they possible not have achieved if they weren't using AWS? Literally every feature of AWS exists somewhere else. Maybe not all of the same features in the same place, but to say they couldn't run Stripe without AWS strikes me a bit silly.
This statement is what lead me to have the above perspective:
> “Stripe has been a trusted partner, helping accelerate our business at every turn,” said Max Bardon, vice president of payments, Amazon. “In particular, we value Stripe’s reliability. Even during peak days like Prime Day, Black Friday, and Cyber Monday, Stripe delivers industry-leading uptime. We appreciate Stripe’s relentless commitment to putting users first.”
Translated: Stripe has better reliability than the systems we've setup ourselves, especially during peak days.
Don't take it literally.
"I couldn't have made it to the top of the mountain without these specific hiking boots" doesn't mean it was literally impossible without that exact brand of hiking boots. It means they like the boots, it made the experience better for them, and they think the hiking boots are better than comparable ones.
I don't think the CTO is claiming that Stripe is solving a problem that would be impossible to solve without AWS. He's saying we wouldn't be as well positioned today if we had to solve the problems that AWS solves ourselves, or by relying on their not-quite-as-good competitors.
Leadership often made it clear that Amazon was right at that limit, and wanted to send a lot more volume, but FedEx wouldn't let them, in order to maintain "independence."
To your point: it didn’t stop them from working to cater to Amazon’s every whim, and it did provide Amazon the incentive to build a (better and more cost-effective) fulfillment and shipping network themselves.
I don’t know what the “right” play was, and obviously the story is far from over. But FedEx always seemed to me like they chose the worst of both worlds.
I suspect the bigger appeal to Stripe is all the international alternative payment methods that Amazon doesn't have to worry about with Stripe handling it.
At AWS' scale, fully managed, when Stripe was founded (2010)? Bullshit. Back then, and even up until ~2013-2015 the state of the art was either VPS, colo where you DIY everything from the nuts and bolts to databases, Heroku/Google App Engine where you have little control, hosted VMware (utter shit), and slowly, AWS.
You're making the classic Dropbox mistake. Today yes, the majority of what you can do on AWS can be done elsewhere (mostly Azure and GCP, depending on specific features needed maybe one of the smaller ones like OCI).
I'm sure Amazon Pay or AWS Payments or whatever must have got some serious consideration. Not to mention every bank offering a direct relationship.
Amazon likes to diversify their payment processors. They don't have one payment processor for one region because it's an availability issue for them. Cost of payments is big. So this is likely some agreement to help Amazon reduce their cost of payments, by essentially redirecting costs to the AWS side of things. India likely isn't being processed because India has regulations that most other countries do not. Adyen, Braintree, and maybe not even Stripe can be payment processors there (if they are, they're likely just a proxy for another processor).
Honestly the ubiquity of UPI and the rate of it's adaptation in India always surprises me. I hear stories of how small, often illiterate vendors selling tea for 10 cents on the streets would insist on getting their payment through UPI and not cash because it's more seamless.
UPI handles about 200 million transactions a day in India. I think Visa does like 150 million on their global network?
However going by this news seems like Amazon has more or less given up on their payments ambitions. Could be also due to recent layoffs. This is a big news. Maybe Amazon wants to focus on being good at few things instead of running hundreds of experiments.
Edit: References.
[2] https://www.forbes.com/sites/ryanmac/2015/10/30/amazon-kills...
[0] https://archive.is/R7m9s / https://www.allthingsdistributed.com/2007/08/the_amazon_flex...
Except for this, it's great.
Stripe processes payments in India, and has for over five years:
TSMC uses Apple as their first-and-best customer for their bleeding edge chips, using fat stacks of iPhone cash to push the limits of semiconductor technology.
Then they can keep selling chips built on that process for a decade or more (to a very long tail of other customers).
Nobody would say that TSMC isn't dependent on Apple! They're certainly tied very tightly. But they've turned that dependency into just the top of a very profitable funnel.
Though... that was also because their main handheld vendor (Zebra) bought their own warehouse robotics company, so a bit of a signal to Zebra that they don't play well when their partners become competitors.
https://renovotec.com/press/amazon-2nd-largest-shareholder-p... https://www.communicationstoday.co.in/koreas-point-mobile-ex...
SEPA's equivalent in the US is ACH, and in recent years ACH (which is a much older system) has mostly closed the gap with SEPA. Also, SEPA Instant exists, but not all banks are guaranteed to support it - as of even just a few months ago, many popular banks don't support it, which means that using SEPA reduces to ACH (in terms of payout settlement and information flow at POS).
Europe also has additional country-specific methods, so you can lean on (e.g.) iDEAL or or BACS if you know you're primarily dealing with Dutch or British customers, but that's not going to help you if you need seamless use across Europe.
ACH just never took off culturally in the US as a popular payment scheme - in part because of the easy availability of credit cards, which are usually free to the consumer and provide additional protections (such as chargebacks) that both ACH and SEPA lack. By contrast, credit card adoption is historically much lower in Europe (especially when segmented by country), so it makes sense that SEPA, for all its drawbacks, would catch on as a more popular method.
Of course, all of these pale in comparison to India's payment schemes, which are light-years ahead.
Over expanding to fullfil a single large customer who isn't actually reliant on you is a good way to end up bankrupt. Seems like FedEx made the right move here.
Maybe everywhere that accepts Apple Pay, but given how low credit card penetration is in Europe overall (relatively), it's almost impossible to avoid falling back on cash at some points unless you're very limited in the places you patronize.
UPI adoption is massive (and not just in India). The ubiquity of it is a huge benefit to the consumer - simply the knowledge that you can reliably depend on using it even for a random street vendor is a huge paradigm shift, compared to the status quo of knowing that it might be an option, or might not, depending on who you're talking to.
This does seem very un-amazon from my outside perspective. In the past I've always had the impression that amazon are very happy to shovel money in to an area if they think it'll improve their margin and/or protect them from reliance on third parties. This seems exactly the opposite of that! Stripe must be spending a shit load of cash with AWS and offering amazon a pretty attractive rate for processing.
I wonder if GCP has been fishing for stripe's business?
Just to add, UPI is actually no longer limited to India. Several other countries either are currently using it or have contractually agreed to and are in the process of integrating it and rolling it out.
https://business-standard.com/article-amp/finance/rbi-clears...
It would be a large acquisition but not unheard of.
Being aggressive in banks is only half the equation. You also need to be aggressive against the e-commerce platform's own greediness.
.. track history proves otherwise.
No seriously, I used to use Amazon Pay for years long ago when it first became available for woocommerce powered stores and I specifically stopped because I had to manually download and go through all my weekly reports and add up the fees I was paying for my business's taxes. As advanced as Amazon can be sometimes they are very dinosaur like when it comes to financial reports or taxes. It took decades for them to collect taxes from sellers. Took years for them to finally catch a couple that were scamming millions of dollars in returns out of sellers. I stopped bothering with any Amazon products because of the years of glitches, gotchas, lack of reports, lack of understanding user intent or use cases. And the thing is, Amazon Pay was great, I had a lot of customers that used it and prefered to pay that way.
From a customer POV, UPI with it's lower success rates, no chargeback/dispute mechanism and with higher latency (take out your phone -> unlock -> open app -> click scan QR button -> enter pass -> Look at loader for 3-10 sec) is worse than debit card set up on phone / watch.
It was very ambitious, supporting a scripting language for what are now called smart contracts, and very complex payment schemes.
It was also a huge pain in the ass to integrate, and the user payment flow was wonky, with a redirect to multiple amazon branded pages to log in to amazon, then redirect back to finish the transaction.
I've not used stripe, but people who have tell me it is super easy to integrate.
A) You have to initiate a transfer at your bank, there's no way to use ACH independently as a consumer without a commerce setup or relying on a 3rd party (like Zelle).
B) There's no confirmation step. If someone has your Account Number and Routing Number and does have a commerce setup, they can debit your account at any time.
That's actually not true - it appears that way because in practice ACH is only used in corner cases in the US, but it is absolutely possible.
> There's no confirmation step. If someone has your Account Number and Routing Number and does have a commerce setup, they can debit your account at any time.
...I have bad news for you about what the SEPA standards require!
Makes sense for Amazon to work with a market leader in this case rather than spend years playing catch up. Perhaps in the long run they'll acquire Stripe instead of simply partnering.
However, I am very surprised that they are abandoning their own first-party payments to Stripe. Don't you all already have the very best rates possible, directly negotiated by every bank? In other countries Amazon has even threatened to stop accepting cards because they couldn't negotiate the fees they wanted, and they are about the only merchant big enough to dare doing that.
I'm sure they won't be paying Stripe the standard 2.9%, but still--what value does Amazon get out of this? Stripe is supposed to make payments easy from both a coding and business perspective for developers. Everything Stripe does, from card acceptance to fraud handling to UX to ACH payouts Amazon already has working at large scale.
There is some dogma that Amazon is peerless at building platforms and developing APIs, but this is a pretty big failure to capture the market given a huge head start.
Anyway: Amazon Flex drivers actually did handle delivery for Amazon Restaurants, which was a direct competitor to Uber Eats, DoorDash, GrubHub, Caviar, etc.
[0] https://www.insiderintelligence.com/content/amazon-hopes-inc...
These deals are priced on a cost-plus basis. Amazon might pay Stripe the cost of the underlying network fee plus .1% or half of cent.
Stripe negotiates fees with leverage.
note Stripe is publicly commuting to AWS in this announcement. It’s likely that the exchange here is “we use you for payments and you commit to $Xbn in AWS spend.”
Similar to MSFT and OpenAI. We give you billions, you spend it right back on Azure.
Just a quick guess I am pulling out of my ass.
Did somebody high up do a cost analysis/breakdown that said: is this entire business org making the company money or can we just use Stripe for less money?
Does it boil down to that gross oversimplification or not?
I'm sure it isn't easy to quantify the intangibles (if there were any) on what edges Amazon had over Stripe and benefitted from by choosing to do it in house. I'm sure it might not seem like an apples-to-apples comparison, but I guess when you zoom out high enough (company spending $X money in, getting Y out) it's comparable to any other purchasable good/service?
> Stripe will become a strategic payments partner for Amazon in the US, Europe, and Canada, processing a significant portion of Amazon’s total payments volume across its businesses, including Prime, Audible, Kindle, Amazon Pay, Buy With Prime, and more.
That makes it sound like some things (and certainly a significant percentage of the total) will be processed by Stripe, but not all spend. For example it doesn't seem like normal purchases on amazon.com would actually be processed by Stripe at this time.
That would definitely be a factor, but also competitive strategy and product placement. Do they really want to try and take on Stripe, Apple Pay, Shopify, etc? What exactly are they offering that's unique? Is it a core competency? How does this work alongside existing business interests?
And more.
Is the answer "they did when the Federal Reserve had interest rates at 0.25%" and now that interest rates are currently are 4.5% headed toward potentially 5%+ and/or just staying in the 4-5% range for at least 6-12 months "no"?
Somebody (multiple people?) obviously signed off on investing resources into this in the first place. How long ago, I'm not sure. Could some clairvoyantly even back then that this would get scraped? No clue, I have no internal leg up/leak/data.
Why was the answer yes then (yes = invest in it) and now, when they have a finished-ish product, no (no = don't try to internally compete with Stripe)?
That would make a lot of sense: they mention increasing their use of AWS and this is something that neither Google nor Microsoft could really match as the carrot for an exclusive commitment. Stripe is already pretty big but being able to say Amazon trusts them with payments is a pretty strong sales pitch.
I read an article back in ~2006 that made a similar point [1]
If you're a lawnmower manufacturer and Wal-Mart comes to you and says they want to make you their main supplier of lawnmowers and they need X units per year (which will double your sales) that sounds like a great deal which will really grow your business - right?
But once you've built a second factory to deal with all this extra sales volume and hired a bunch of extra workers, if Wal-Mart decide that $250-retail-price lawnmower is going to cost them $20 less next year you can't walk away, because you've got to pay the loans you took out to build this new factory.
[1] https://www.fastcompany.com/54763/man-who-said-no-wal-mart
Same with Amazon's leverage for vendor negotiation. They will go for stock warrants if it's a big enough deal and they have the right leverage. More upside that way and it creates a competitive moat.
No idea if that's the case here though.
https://www.fastcompany.com/47593/wal-mart-you-dont-know
> The gallon jar reshaped Vlasic’s pickle business: It chewed up the profit margin of the business with Wal-Mart, and of pickles generally. Procurement had to scramble to find enough pickles to fill the gallons, but the volume gave Vlasic strong sales numbers, strong growth numbers, and a powerful place in the world of pickles at Wal-Mart. Which accounted for 30% of Vlasic’s business. But the company’s profits from pickles had shriveled 25% or more, Young says–millions of dollars.
> The gallon was hoisting Vlasic and hurting it at the same time.
> Young remembers begging Wal-Mart for relief. “They said, ‘No way,’ ” says Young. “We said we’ll increase the price”–even $3.49 would have helped tremendously–“and they said, ‘If you do that, all the other products of yours we buy, we’ll stop buying.’ It was a clear threat.” Hunn recalls things a little differently, if just as ominously: “They said, ‘We want the $2.97 gallon of pickles. If you don’t do it, we’ll see if someone else might.’ I knew our competitors were saying to Wal-Mart, ‘We’ll do the $2.97 gallons if you give us your other business.’ ” Wal-Mart’s business was so indispensable to Vlasic, and the gallon so central to the Wal-Mart relationship, that decisions about the future of the gallon were made at the CEO level.
> Finally, Wal-Mart let Vlasic up for air. “The Wal-Mart guy’s response was classic,” Young recalls. “He said, ‘Well, we’ve done to pickles what we did to orange juice. We’ve killed it. We can back off.’ ” Vlasic got to take it down to just over half a gallon of pickles, for $2.79. Not long after that, in January 2001, Vlasic filed for bankruptcy–although the gallon jar of pickles, everyone agrees, wasn’t a critical factor.
It's easy to forget (looking from the bottom-up) that when you're surveying from the top-down, there are always alternative places to spend $1.
So it isn't enough to make >$1 in return for every $1 invested, you have to offer better return than the other things the company could be doing with that capital.
F.ex. in retail, there's an everpresent alternative of investing in logistics and warehouse automation, which saves the business a LOT of money
To me it's big step up in maturity for Amazon to find the right areas to focus on, and get the right partnerships.
The PR statements are very carefully worded to say, strategic partner that will be "processing a significant portion of Amazon’s total payments volume." If significant portion was going to mean anywhere near 100%, I'm sure Stripe would have shouted that fact from the rooftops even louder (what a huge win that would be!).
For my money, this really just reads like mostly a quid-pro-quo deal, you give me X% of payments volume, I'll give you Y level of commitment to AWS. With no insider knowledge of any kind, I would wildly speculate that "significant portion" could mean a value of X as low as 5-10%.
And the big thing now (at least I think it is, although I don't have any proof that companies are actually doing this) is...
https://www.investors.com/etfs-and-funds/sectors/sp500-compa...
I don't think every one of these corporations is going to take 100% of their cash on hand and stash it into 10 year bonds overnight...
But I'm lead to believe some variation of this is happening. Corporations can make 3-4% risk free + short term. If you work on a project that doesn't bring the company at least 3-4% ROI after it's all said and done (you, your managers, all expenses, etc.)... why are you owed a job?
Very cruel and mean reality, right?
Next to Walmart, Amazon is probably the largest single credit card payment recipient on planet earth right now, at least in volume of transactions. If Amazon went through the work as you mentioned, to build our their own payments solution for several years and eventually abandoned it in favor of using "off-the-shelf" Stripe. Now, I do recognize that I am sure Stripe is somewhat customized for Amazon's use case and they obviously aren't charging Amazon anywhere near 2.9% + 30¢ per transaction. So its a little different than the Stripe we use, but its still a fascinating argument in the "Buy vs Build" debate to favor buying over building.
I find it also interesting coming from Amazon. Since much of the work I am doing right now is moving internally-built technical systems to AWS' managed and built solutions. So I am deep in the transition of moving built technical systems to a buy model from AWS across many different technologies. To see Amazon dishing off their payments to another company instead of maintaining it in house just feels like the ultimate "circle of life" or rather, "circle of specialization".
Tech is getting so complicated now that its becoming harder and harder to justify in-house solutions to problems. It seems like anymore we are moving everything to be managed by a different provider with companies focusing on one or two things they are amazing at and everything else being passed to another company who specializes at that other thing.
The real innovation in this space seems to have come from companies replacing more layers in your typical e-commerce stack, like Shopify.
For me, Apple Pay is the only "new" payment processor that actually competes with PayPal because Apple made the user experience a lot faster and more convenient.
By merging data about every purchase, both Amazon and stripe benefit dramatically from lowered fraud rates.
Suddenly Amazon now knows when payments on your card are likely to bounce because you're at your credit limit, so they can pick the best time to send you promotional messages.
Stripe 'intelligence' can now have a much stronger good/bad signal for every card.
This deal is primarily a data deal, and both parties will benefit to the tune of hundreds of millions of dollars.
You zelle a friend, sure, yet almost everyone I know use either Venmo or cash app (neither of which are interoperable). Everyone in India uses UPI with different flavors (Google Pay, Whatsapp Cash, Paytm, PhonePe, etc.)
Can you pay for Starbucks or a slice of pizza with Zelle? Probably not. Can you pay like 10 cents to someone selling tea in rural India with UPI? Probably yeah.
Amazon Pay and other payments products from Amazon are customer-facing products that make it easier for customers to make payments. Stripe is the backend software that makes it easier for Amazon to process those payments. They coexist, they don't replace each other.
This announcement is about these services coexisting, not about them competing.
OK, not technically a hedge fund.
UBI is a very good system, no need to exaggerate to feel superior.
[0] https://www.frbservices.org/financial-services/fednow/about....
That was my best educated guess. For long, Amazon invested in payments believing it to be a differentiator and also to spin it off into its own business unit. The payments division at Amazon is huge. But after two decades of not going anywhere with payments business they seem to have thrown in the towel and focus instead on physical logistics side of e-commerce.
Although Visa is everywhere, most places do not accept foreign cards. We stopped in a rest stop on a highway and they had a large food court with a mixture of Indian and Western brands - had to pay cash for all of it, as my card was always rejected by their bank.
One time I had to pay for my accomodation by cash, as their bank would not allow them to accept foreign cards or foreign bank transfers. I had pay 70,000rs (around $850) which meant going to a cash machine and taking out repeated transactions of 10,000rs (the ATMs also have limits for foreign cards). If you aren't familiar with Indian cash, that's a big stack, around 160 notes. It felt like I was doing something illegal :D
If you try to buy something online, almost everything expects you to use UPI. If they do accept cards, then they almost always have the same rule about foreign cards. For example we wanted to buy bus tickets from Red Bus, but couldn't. The only places we found that consistently worked was Swiggy and Uber.
“Under the new agreement, Stripe will become a strategic payments partner for Amazon in the US, Europe, and Canada, processing a significant portion of Amazon’s total payments volume across its businesses, including Prime, Audible, Kindle, Amazon Pay, Buy With Prime, and more,” the Stripe post said.
Amazon Pay isn't working for free, they are arbing the spread between 2.9 and 2.1.
If Amazon has indeed done an evaluation that Strip is more cost-efficient, secure, flexible, or whatever, than maintaining their own payment processing, they don't want to be in a position of Stripe strong-arming them down the road.
For example, here is the original press release for FPS: https://aws.amazon.com/about-aws/whats-new/2007/08/02/amazon...
I do see the Amazon Pay evolution (especially this expanded partnership with Stripe) as a distinct failure to capture the payment market.