Many people don't even know this, but Amazon.com, the 10th most popular website, also serve as a payment gateway that allows web developers to accept credit cards on their websites. There are just about as many people with Amazon accounts as people with Facebook accounts, and Amazon stores credit cards on file as well, making payments incredibly convenient, as customers don't even have to get out their wallets.
So why isn't Amazon dominating payments?
I'm going to show what Amazon could be doing, and I'm going to posit that the reason they aren't is a defensive patent play.
If Amazon really wanted to start dominating in payments, they'd become an OAuth provider.
For those of you who aren't developers, OAuth is the
nightmare protocol system which allows you to login to a website using your identity from another website, which means that it's less clicks for you to log into a new site, and it's easier for the site as they don't have to verify your identity, as they can trust the OAuth provider. You've probably seen this in the form of "Log in with Twitter" or "Log in with Facebook." For instance, we at Gun.io provide this functionality for people with GitHub accounts like so:
We also use Amazon as our payment processor. This means that whenever anybody wants to use Gun.io to hire a freelance programmer, they are forced to make up a username, enter a password and give us their email address. This is a pain point for us, as everyone has a natural reluctance to enter their personal information into a website they've never been to before.
If Amazon was also an OAuth provider, we could allow people to post jobs without entering any personal information, all with a single click.
And that's where it gets complicated.
In one of the most bone-headed moves in internet history, the US Patent and Trademark Office granted US 5960411 to Amazon.com back in 1999, granting them sole ownership of the concept of buying something online with a single click.
I'll skip explaining why it was one of the worst patents ever issued, but the fact of the matter is that Amazon.com can now dictate the flow of every checkout procedure on the entire web through legislation, which they routinely do. It's not they they have the resources to sue every website on the internet, but they've proven that they have the authority to beat you in court if you get big enough, and that has set the tone for all checkout systems on the entire internet.
It's my speculation that this patent is the reason why Amazon has deliberately chosen not to become an OAuth provider. If they did, and sites like this one became 'One Click Buy' websites, that would shift the standard expectation of internet sales away from Amazon's favor. Other sites would start to become more convenient, Amazon's competitive advantage would slip, and that would hurt their sales.
In my opinion, the payments space is still wide open. Amazon Payments isn't actually that bad, especially compared to PayPal and Google Checkout, but they are a loonngg way from perfect.
Fortunately, there a few good-looking startups starting to enter the field. The one to keep an eye is Stripe.com, which has taken a modern, developer-centric approach to payments. Whereas Amazon's FPS documentation is literally hundreds and hundreds of pages long in a PDF, buried somewhere in their labyrinth of services (seriously, try to find the PDF I'm talking about. I'll give you a dollar if you can do it in less than 20 minutes), Stripe instead provides a service which lets you charge a credit card with a single line of code. It's great.
Now, of course, what would make Stripe even better would be One-Click-Buy (or, rather, two-click-buy, to avoid the patent hammer). It'd be an extremely smart move for them to pair up with/be acquired by one of the major OAuth providers, particularly Twitter or Facebook. I'll be extremely surprised if Twitter or Facebook doesn't gobble them up and become a payment processor themselves sometime in the next year or two.
Of course, these are just the opinions of one developer, though I am developer who has become quite intimate with the services I've mentioned here. Still, take my opinions with a pinch of salt.
What are your thoughts? Leave them in the comments below!
Posted by Rich JonesLinkedIn Twitter Website