Fintech

Amazon wants a crypto play. Its history in payments is not encouraging.

It missed chances to be PayPal, Square and Stripe — so is this its chance to miss being Coinbase, too?

Amazon logo over bitcoin logo

Amazon wants to be a crypto player.

Image: NurPhoto/Getty Images

The news that Amazon was hiring a lead for a new digital currency and blockchain initiative sent the price of bitcoin soaring. But there's another way to look at the news that's less bullish on bitcoin and bearish on Amazon: 13 years after Satoshi Nakamoto's whitepaper appeared on the internet, Amazon is just discovering cryptocurrency?

That may be a bit unkind, but the truth is sometimes unkind. And the reality is that Amazon has a long history of stumbles and missed opportunities in payments, which goes back more than two decades to the company's purchase of internet payments startup Accept.com.

It's hard to remember how crude payments were in those days. Early Amazon employee Shel Kaphan recalled for Forbes how the website let customers who were afraid of inputting a full credit-card number online could phone or fax in the digits, which he or Jeff Bezos or another employee would match up with their order.

It worked well enough, but it wasn't designed for third-party sellers. Amazon had eBay in its sights, so it snapped up Accept.com for $175 million, even as eBay had been courting the startup. Amazon zShops launched a few months later. It was mostly a flop, but it laid the groundwork for Amazon's third-party seller marketplace.

The problem was that Accept.com got swept up into the bowels of Amazon's infrastructure. The service its founders had envisioned — pay anyone, for anything, anywhere online — fell by the wayside. Meanwhile, Elon Musk, Peter Thiel and Max Levchin were working on their payments startups, which would soon merge to become PayPal and leverage eBay's auctions to become the first real fintech giant. EBay bought PayPal in 2002 for $1.5 billion.

Amazon had plenty of its own payments problems to solve, like fraud. An Accept.com employee, Jaya Kolhatkar, took charge of that effort, and got Amazon's fraud rate down to a reasonable level. And its 1-Click payments was a genuine innovation. But all that payments wizardry — including the boost it got from Accept.com — remained captive inside Amazon for years. It wasn't until 2013 that Amazon created a "Pay With Amazon" button for non-Amazon storefronts — the innovation that catapulted PayPal to internet ubiquity in 1999. Amazon Pay is still struggling for market share.

The pattern repeated in mobile payments. Amazon bought technology and hired a team from GoPago, the maker of a point-of-sale system that was challenging Square's iPad-based system for space on cafe counters, in 2013. Blink and you may have missed Amazon Local Register, which launched in 2014 and shuttered a year later. Amazon's person-to-person payment system, WebPay, had almost as short a life.

In the business of back-end payments — the domain of Stripe and PayPal's Braintree — Amazon has also seen reversals. Kickstarter, a marquee customer for Amazon Payments, dropped it in 2015 in favor of Stripe after Amazon discontinued its Flexible Payments Service.

Amazon could have been PayPal, Square or Stripe. But its payments services didn't become any of those things. (An Amazon spokesperson did not respond to a request for comment on its payments efforts.)

Here's a counter-argument to all of this: Adding Accept.com to Amazon was a huge win, even if it never became PayPal, because Amazon now handles a gigantic volume of payments, and even slight improvements add up. Adding anything to Amazon makes it big, because Amazon is big.

That worked as Amazon went from books to music to electronics. But payments isn't a line of business: It's a complex, interconnected web of services that all have to work together, and it's crucial to other functions like security, customer support and marketing. One of the hardest things for Amazon is convincing other retailers that it won't screw them over, which is why Microsoft Azure and Google Cloud are actively wooing internet sellers, and why PayPal has thrived since it split off from eBay.

So now Amazon wants to hire someone to lead its crypto efforts. It sounds like a fun job, and a good way to learn a lot. Accept.com alumni have done well: Kolhatkar is now the executive vice president for data in Disney's direct-to-consumer business, and co-founders Erich Ringewald and Mark Britto are in top roles at PayPal. If the past is prologue, look for Amazon's crypto payments chief to be changing the world of commerce … somewhere else, after they leave.

Climate

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Photo: Goh Seng Chong/Bloomberg via Getty Images

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Fintech

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Photo: Stephen McCarthy/Sportsfile for Collision via Getty Images

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Photo: Geoff Livingston/Getty Images

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Enterprise

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Photo: Microsoft

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