Last month, Amazon India announced, without much noise, that it would allow Amazon Pay users to transfer money to each other through Unified Payments Interface (UPI), one of the most popular routes for making online transactions in the country.
It is the e-commerce giant's biggest recent decision in the digital payments segment, marking its entry in what promises to be a global battle for this market.
Amazon Pay will jostle for a bigger slice of peer-to-peer (P2P) transactions against incumbents Paytm, which is backed by Alibaba and SoftBank, Flipkart's PhonePe, and Google Pay, besides potential entrants such as Facebook-owned WhatsApp and Mukesh Ambani's Reliance Jio.
Among the countries of its prime focus globally, Jeff Bezos-led Amazon is betting most aggressively in the payments business in India. The push follows huge investments in its e-commerce operations: the company has pumped in Rs 27,290 crore in the flagship unit Amazon Seller Services.
Amazon Pay has received capital infusion of Rs 2,771 crore since its launch in 2016, according to regulatory filings sourced from Tofler, a business intelligence platform. More than half of this capital was injected in 2018 as Amazon changed gears to bolster its payments business quickly.
The company has increased the investment as part of efforts to woo customers with cashback offers, even as it continues to launch new products to cater to every class of Amazon users in India, according to three people aware of the developments.
And Amazon, they say, is only getting started, indicating that its spending and payments network will expand.
"There is a higher use case in payments than in shopping. What we have seen is that customers who transact on the marketplace have a higher tendency of using it elsewhere and vice versa," Mahendra Nerurkar, the head of Amazon Pay India, told STOI. "It essentially creates a sticky experience for customers to go around that cycle, and they then tend to shop more on Amazon marketplace."
He declined to discuss, in numbers, the likelihood of a person shopping on Amazon if they use Amazon Pay.
The reason Amazon India started a payments business in India is quite different from why it may continue to build out one. About four years ago, cash on delivery was the most clicked payment option; penetration of credit and debit cards was low; and patchy internet connections ruined customer experience.
In 2016, the company introduced a prepaid wallet on the shopping platform through a partnership with gift-card firm QwikCilver, mainly to reduce payment failures and issue refunds to customers returning products. The following year, Amazon India obtained a wallet licence.
The developments nudged more Amazon customers towards the prepaid option. Today, 65 to 70% of orders placed on Amazon are prepaid, higher than the industry average of 40%, according to the company. The big shift in this direction occurred early last year when the percentage of prepaid orders hit the 60-mark, Nerurkar added.
As Amazon India now competes with Paytm and Walmart-owned Flipkart, which runs PhonePe, a robust payment business is likely to be a crucial tool for retaining customers and getting data on their spending patterns. Amazon has onboarded leading merchants like food delivery player Swiggy, ticketing portal BookMyShow, travel agency Cleartrip, and online pharmacy Netmeds, apart from covering utilities payments.
"We are seeing equal [50-50] use case of customers transacting on anchor merchant Amazon and on others [third-party merchants]," said Nerukar, who has been at the company for a decade.
Vikas Bansal, director (emerging payments), Amazon Pay, is making sure people have more payment options while buying products on the platform, lining up Amazon co-branded credit cards, instant EMIs, and now peer-topeer transactions via Unified Payments Interface.
The idea, he said, was to serve the needs of different sets of consumers instead of looking at only select use cases. However, the focus on quality of customers continues to be strong, as Nerurkar does not have an affinity for deal hunters who switch platforms based on discounts.
"Our recent survey showed that the main reason customers are willing to share data with a company is the payments experience. Therefore, it is important for a player like Amazon to enable all payment tools. This data not only reveals shopping patterns but also helps to work with merchants accordingly on lending and product inventory," said Arnav Gupta, an analyst tracking digital payments at Forrester.
For Amazon, the more people use its payment products, the better it is for the company as this data remains within its ecosystem. "Amazon Pay is no more just a tool for easier refunds or faster payments on the marketplace. It must be spending at least $7 million to $8 million monthly. And this will rise as they focus on offline expansion," a person aware of the matter said.
Amazon is using QR codes for offline expansion; it is quietly working with its investee company ToneTag for faster payments at brick-and-mortar establishments. "You can pay at a Starbucks café or at other offline merchants from the Amazon app itself as Tone-Tag's technology gets integrated. This will remove several barriers and offer data insights into customers' spending habits," the person said.
The person added: "They [Amazon] are working with ToneTag, which enables digital payments using sound waves, across urban and non-urban markets. Soundwave technology works with feature phones; and merchant devices are cheaper than point-of-sale machines."
ToneTag co-founder Kumar Abhishek declined to comment. On the offline expansion, Nerurkar said it was still early days as the customer segment here was different from the one Amazon had served so far.
The work-in-progress strategies provide hints about Amazon's ambitions. However, there are some major hurdles. To begin with, Amazon will have to ensure that customers complete KYC requirements for their wallets. If they don't, the wallets will become unusable after September. Physical verification has not worked for Amazon. Nerurkar admitted users had found it difficult to follow the process.
Meanwhile, some believe Amazon is a late entrant in the digital payments race. "The UPI battle is between Google Pay and PhonePe, and the gap is quite wide now. It's a steep task to get close to these companies," an Amazon executive said. It also remains to be seen how Amazon's bet on wallet pays off at a time most payments players are pushing their UPI platforms to users.
For now, Nerurkar and his team can draw some inspiration from Bezos's famous line: "Your margin is my opportunity."
It is the e-commerce giant's biggest recent decision in the digital payments segment, marking its entry in what promises to be a global battle for this market.
Amazon Pay will jostle for a bigger slice of peer-to-peer (P2P) transactions against incumbents Paytm, which is backed by Alibaba and SoftBank, Flipkart's PhonePe, and Google Pay, besides potential entrants such as Facebook-owned WhatsApp and Mukesh Ambani's Reliance Jio.
Among the countries of its prime focus globally, Jeff Bezos-led Amazon is betting most aggressively in the payments business in India. The push follows huge investments in its e-commerce operations: the company has pumped in Rs 27,290 crore in the flagship unit Amazon Seller Services.
Amazon Pay has received capital infusion of Rs 2,771 crore since its launch in 2016, according to regulatory filings sourced from Tofler, a business intelligence platform. More than half of this capital was injected in 2018 as Amazon changed gears to bolster its payments business quickly.
The company has increased the investment as part of efforts to woo customers with cashback offers, even as it continues to launch new products to cater to every class of Amazon users in India, according to three people aware of the developments.
And Amazon, they say, is only getting started, indicating that its spending and payments network will expand.
"There is a higher use case in payments than in shopping. What we have seen is that customers who transact on the marketplace have a higher tendency of using it elsewhere and vice versa," Mahendra Nerurkar, the head of Amazon Pay India, told STOI. "It essentially creates a sticky experience for customers to go around that cycle, and they then tend to shop more on Amazon marketplace."
He declined to discuss, in numbers, the likelihood of a person shopping on Amazon if they use Amazon Pay.
The reason Amazon India started a payments business in India is quite different from why it may continue to build out one. About four years ago, cash on delivery was the most clicked payment option; penetration of credit and debit cards was low; and patchy internet connections ruined customer experience.
In 2016, the company introduced a prepaid wallet on the shopping platform through a partnership with gift-card firm QwikCilver, mainly to reduce payment failures and issue refunds to customers returning products. The following year, Amazon India obtained a wallet licence.
The developments nudged more Amazon customers towards the prepaid option. Today, 65 to 70% of orders placed on Amazon are prepaid, higher than the industry average of 40%, according to the company. The big shift in this direction occurred early last year when the percentage of prepaid orders hit the 60-mark, Nerurkar added.
As Amazon India now competes with Paytm and Walmart-owned Flipkart, which runs PhonePe, a robust payment business is likely to be a crucial tool for retaining customers and getting data on their spending patterns. Amazon has onboarded leading merchants like food delivery player Swiggy, ticketing portal BookMyShow, travel agency Cleartrip, and online pharmacy Netmeds, apart from covering utilities payments.
"We are seeing equal [50-50] use case of customers transacting on anchor merchant Amazon and on others [third-party merchants]," said Nerukar, who has been at the company for a decade.
Vikas Bansal, director (emerging payments), Amazon Pay, is making sure people have more payment options while buying products on the platform, lining up Amazon co-branded credit cards, instant EMIs, and now peer-topeer transactions via Unified Payments Interface.
The idea, he said, was to serve the needs of different sets of consumers instead of looking at only select use cases. However, the focus on quality of customers continues to be strong, as Nerurkar does not have an affinity for deal hunters who switch platforms based on discounts.
"Our recent survey showed that the main reason customers are willing to share data with a company is the payments experience. Therefore, it is important for a player like Amazon to enable all payment tools. This data not only reveals shopping patterns but also helps to work with merchants accordingly on lending and product inventory," said Arnav Gupta, an analyst tracking digital payments at Forrester.
For Amazon, the more people use its payment products, the better it is for the company as this data remains within its ecosystem. "Amazon Pay is no more just a tool for easier refunds or faster payments on the marketplace. It must be spending at least $7 million to $8 million monthly. And this will rise as they focus on offline expansion," a person aware of the matter said.
Amazon is using QR codes for offline expansion; it is quietly working with its investee company ToneTag for faster payments at brick-and-mortar establishments. "You can pay at a Starbucks café or at other offline merchants from the Amazon app itself as Tone-Tag's technology gets integrated. This will remove several barriers and offer data insights into customers' spending habits," the person said.
The person added: "They [Amazon] are working with ToneTag, which enables digital payments using sound waves, across urban and non-urban markets. Soundwave technology works with feature phones; and merchant devices are cheaper than point-of-sale machines."
ToneTag co-founder Kumar Abhishek declined to comment. On the offline expansion, Nerurkar said it was still early days as the customer segment here was different from the one Amazon had served so far.
The work-in-progress strategies provide hints about Amazon's ambitions. However, there are some major hurdles. To begin with, Amazon will have to ensure that customers complete KYC requirements for their wallets. If they don't, the wallets will become unusable after September. Physical verification has not worked for Amazon. Nerurkar admitted users had found it difficult to follow the process.
Meanwhile, some believe Amazon is a late entrant in the digital payments race. "The UPI battle is between Google Pay and PhonePe, and the gap is quite wide now. It's a steep task to get close to these companies," an Amazon executive said. It also remains to be seen how Amazon's bet on wallet pays off at a time most payments players are pushing their UPI platforms to users.
For now, Nerurkar and his team can draw some inspiration from Bezos's famous line: "Your margin is my opportunity."
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