Amazon-Stripe partnership

I worked on Amazon Payments systems for quite some time back in the day. We took pride in being the best payment processors. Had direct connections with card networks, banks and what not. We even launched a PayPal competitor[1]. They launched a Square like device for physical retailers[2]. They invested some serious money in building and maintaining all of that.

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.

[1] https://pay.amazon.com

[2] https://www.forbes.com/sites/ryanmac/2015/10/30/amazon-kills...

> 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.

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 noting from my experience that many e-commerce platforms like Shopify have started charging an extra "third-party payment fee" for not using their own payment platform so all the savings gained from lower fees would've been ate up by the other platform.

Being aggressive in banks is only half the equation. You also need to be aggressive against the e-commerce platform's own greediness.

"good at few things".

.. track history proves otherwise.

joke So how long until an Amazon representative complains on HNews about Stripe locking them out of their account and not telling them why?

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.

Elaborate?

Payments are hard, it's no coincidence that only a handful of tech companies do it well despite it being one of the more lucrative areas to do business in.

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.

I'm not surprised that they are giving up on Amazon Pay, as that never seemed to get much traction or customer recognition.

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.

It's pretty wild that Amazon is playing "catch up" at all. Amazon Pay was launched years before Stripe was even founded. Not to mention Amazon has been at the forefront of online payments since the 90s (Amazon itself was founded 4 years before PayPal).

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.

It's odd too because I recently saw this headline across my screen: Amazon hopes to increase checkout dominance via Buy with Prime expansion[0].

[0] https://www.insiderintelligence.com/content/amazon-hopes-inc...

> I'm sure they won't be paying Stripe the standard 2.9%, but still--what value does Amazon get out of this?

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.

> Could be also due to recent layoffs.

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?

It's not clear from the announcement that they are giving up all first-party payments to Stripe.

> 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.

> 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?

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.

> Do they really want to try and take on Stripe, Apple Pay, Shopify, etc?

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)?

> I wonder if GCP has been fishing for stripe's business?

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.

Low interest rates can mask poor business decisions, or make it cheaper to place bets on new products. Higher rates change the IRR calculation and perhaps overall business strategy too. So yea probably re: 0.25%

> Stripe negotiates fees with leverage.

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.

Good note when talking about large businesses and org-wide initiatives.

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

I have no inside knowledge, but maybe rather than stop experimenting, they'll just declare some failures rather than keeping mediocre offerings alive. I have no first hand knowledge that Amazon payments was good or bad, but I also took note of Amazon partnering with Slack. That seemed as an ack that Chime's chat was never going to be good as Slack, might as well join them.

To me it's big step up in maturity for Amazon to find the right areas to focus on, and get the right partnerships.

As another former Amazonian (but not near payments stuff by any means), judging from the outside, this doesn't sound like it equates to the death of Amazon Payments at all.

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%.

> 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.

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?

Where do companies like Apple park their cash short term? Obviously not 10Y bonds most likely?

Short-term yea treasuries and things like that.

How do you get notified of HN comment replies, or do you also incessantly check your profile comments like I do?

this just sounds like stripe will handle some of the payment processing volume for digital purchases

doesn’t sound like it’s a replacement for the amazon pay button at all

I check them incessantly depending on how the day is going :)

Amazon is ok with internal competition, so this could just be a way of keeping options open while locking in a large customer. Maybe Stripe is better in some markets or verticals but Amazon will still rely on Amazon Payments for others. Long term there could still be a convergence on one or the other. (Amazonian but this is complete guesswork)

This announcement to me is possible the strongest argument against building your own payments platform that I've ever seen.

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.

It's probably also worth pointing out that Mike Clayville is the Chief Revenue Officer at Stripe. He was previously the head of the global sales org at AWS and reported directly to Andy Jassy. If anyone had the perspective to be able to make the case to Amazon that they should ditch whatever they'd built and just use Stripe, Mike was in a pretty unique position to help make that happen.

Google Pay, Amazon Pay, and other attempts by big companies to shoehorn their way into this market have to contend with the fact that PayPayl came first, and is "good enough" for the vast majority of people.

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.

They aren't giving up on Amazon Pay. There's misunderstanding in this thread about what this announcement is.

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.

I don't see how this is a failure at all. Amazon Pay and Stripe are not competitors. Amazon Pay is a customer-facing service that makes it easier for customers to enter their credit card information and use it across multiple websites. Stripe is the backend service that processes those payments for on financial networks.

This announcement is about these services coexisting, not about them competing.

google pay has decent presence in APAC

I wonder if this is to process region specific transactions.

Apple specifically runs its own hedge fund to manage its cash: https://en.wikipedia.org/wiki/Braeburn_Capital

OK, not technically a hedge fund.

> alternative of investing in logistics and warehouse automation, which saves the business a LOT of money

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.

Amazon JP supports many local payment methods other than credit/debit cards that Stripe will never support, so it's unlikely able to switch all transactions. I suspect other local Amazons have local payment methods.

Amazon Pay *NOW* is just a customer-facing service, but originally it was envisioned as a PayPal/Stripe type service for transferring money. It has evolved greatly over the years, and in the years before Stripe was even founded it was attempting to compete with PayPal (and ultimately what ended up being Stripe as well).

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.