Amazon.com, Inc. (NASDAQ:AMZN) Sees No Logic In Partnering With PayPal Holdings Inc (NASDAQ:PYPL)


Amazon.com, Inc. (NASDAQ:AMZN) is not planning to include PayPal Holdings Inc (NASDAQ:PYPL)’s online payment service as a payment option on its platforms. That may come as a setback to those who might have hopped that separating PayPal from the parent eBay Inc (NASDAQ:EBAY) was going to give it acceptance in places like Amazon. However, the reason Amazon isn’t interested in PayPal as a payment option is that it doesn’t just make sense – its customers haven’t asked for it.

Amazon.com, Inc. (NASDAQ:AMZN)’s rejection of the idea of bringing PayPal on board also has a competitive tone. It seems Amazon believes it can build a successful payment service to rival PayPal on its own. Amazon already has what it calls Pay with Amazon, which works much the same way as PayPal because subscribers can use it to pay for purchases on other online retail sites. Growing Pay with Amazon seems as a more logical strategy for Amazon than partnering with PayPal, which is already struggling to grow its numbers.

When eBay announced that it was separating PayPal as an independent publicly traded company, there were hopes that the move would lift barriers that may have kept the rival retailers from using the Internet-based payments service. However, Amazon’s comments appear to suggest that speculations about PayPal’s growth potential post the split may have been too ambitious.

Pay with Amazon grows 200%

While PayPal is finding it difficult to grow amid heightened competition from a bevy of startups, Amazon’s Pay with Amazon registered 200% growth in merchant membership in 2015. Amazon’s Pay with Amazon is used by merchants such as Gold Now, Shinola and Gogo.

According to Patrick Gauthier, the chief of payments at Amazon, they are looking for nothing less than double growth of the service again this year.

Pay with Amazon, which launched in 2013, boats more than 23 million active users. That compares with PayPal’s 173 million active accounts. While PayPal still dwarfs Pay with Amazon by user count, PayPal’s growth is stalling while Pay with Amazon has more growth headroom. Because Amazon.com, Inc. (NASDAQ:AMZN) serves more than 294 million accounts globally, Pay with Amazon can target this massive customer base for more growth.

Difficult times for PayPal

PayPal is facing competition from small online payments providers who are wooing away its customers with low-cost services. The expansion of the likes of Alphabet Inc (NASDAQ:AMZN)’s Google and Apple Inc. (NASDAQ:AAPL) into the consumer payments service market also threatens PayPal’s business.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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