Visa and Mastercardhate cash, which is why they love that more people are shopping online. The rise of Amazon.com has been good for the major card companies so far, but that could change if Amazon decides it wants more control over how payments work on its site.
“We believe that Amazon poses a real, albeit long-term, risk to Visa, Mastercard, and PayPal,” Bernstein analyst Lisa Ellis wrote in a note to clients Tuesday. She sees several reasons why Amazon could become a payments disruptor, including its large user base, strong cloud-technology operations, and “sheer size,” accounting for perhaps 2% to 3% of all global card payment volumes.
At the very least, Amazon “brings the risk of brand obfuscation” for Visa and Mastercard, since people don’t often realize which credit card they’re using if they pay with a saved card or order something via voice commands.
The bigger threat, though, would occur if Amazon decided to create its own PayPal. “If there’s a value proposition for consumers to start storing their day-to-day spending funds in something like an Amazon Pay wallet, then that poses a longer-term risk to Visa and Mastercard,” Ellis says, since the card companies depend on users storing spending money in their bank accounts. For PayPal, a hypothetical Amazon Pay wallet would be a new direct competitor.
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“This scenario is doable and reasonably likely over the next several years,” according to Ellis, as Amazon has already shown considerable interest in the payments space. The company has gotten favorable terms on its co-branded credit cards, gives Prime members 2% cash back if they use their checking accounts to store a balance, and lets users load up an Amazon account with cash. And Amazon tends to go all in on efforts.
Date:July 25, 2017