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Amazon takes on PayPal, Google with online payments

(MoneyWatch) Retail giant Amazon (AMZN) has just thrown down the online payment glove to PayPal (EBAY), Google (GOOG), and others. It's another step for the company to leverage an efficient infrastructure and take a slice of as many transactions as possible, whether it is doing the selling or not.

Although others have payment networks, Amazon is dangling the promise that companies could get access to its 215 million active customer accounts. In return, Amazon gets more information about customer habits and could potentially use that data to better compete with the companies that are using the payment services.

The company has been running trials and has seen consumer adoption rates that exceeded expectations, according to Amazon's press release. The "Login and Pay with Amazon" system works on desktops, tablets, and smartphones, whether running Google Android, Apple (AAPL) iOS, or Amazon's own variation on Android. A set of programming interfaces and some industry standard authorization protocols allow sites to integrate the payment system.

Although Amazon says that it provides a "mobile-optimized checkout flow," there is no mention of integrating the payment scheme into native apps. If added, that capability would likely not be available for iOS devices as Apple generally prohibits developers from enabling purchases within apps unless using Apple's own payment system.

There is also no mention of Microsoft (MSFT) Windows RT, the version of Windows that runs on some tablets, nor is there BlackBerry (BBRY) support.

Amazon says that its system currently works with 13 third-party e-commerce or shopping cart vendors, which should increase retailer adoption. Amazon's claim is that the presence of an Amazon account option should put at ease consumers who might otherwise be reluctant to create an account with a new-to-them merchant. Even though consumers log in to Amazon, merchants get the customer name, email address, and zip code to effectively create a shadow account for the consumer.

Amazon designed its pricing to match PayPal's, with a rate of 2.9 percent of the amount plus a $0.30 transaction fee and discounted rates through two more levels of monthly sales volume. When the volume hits $100,000 or more, PayPal tells merchants to call a toll-free number to get pricing. Amazon offers an automatic 1.9 percent rate with a 30 cent transaction fee. There are other rates for small transactions and for registered non-profits.

This will represent a serious challenge to PayPal because Amazon probably has even more name recognition. Amazon's entry into this space could be an even bigger problem for Google, which has tried to gain traction for its payment system. With support for Android, companies may decide that Amazon could be a good replacement.

As important as the additional revenue, because Amazon works at thin profit margins, is the potential for additional customer information. Amazon relies on insight into consumer habits to better sell to customers. Offering a payment system allows it to gain even more data on sales that it would not have the chance to complete.

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