Mathematicians tell us that if you watch anything long enough, patterns will emerge. Early in my payments career we led the industry’s transition from physical paper-based card processing to digital electronic processing, and everything was designed to be fast and simple to drive rapid adoption by merchants everywhere. Once we reached critical mass, the cracks started to appear as fraud crept in, and layers of complexity were added to the process to be sure that safe and secure went along with fast and simple.
Now we see Amazon rounding that same corner as it announces its Payment Service Provider Program. Amazon has been a leader in e-commerce for over 20 years now, and the fast, simple processes it brought to its marketplace platform have done nothing less than democratize e-commerce by enabling sellers everywhere to reach a global audience. Part of keeping the barriers to marketplace participation low was enabling marketplace sellers to use the payment service provider (PSP) of their choice if they didn’t want to use Amazon’s bundled PSP service. Now Amazon is announcing that while marketplace sellers still have choices when it comes to the PSP they use, they must select one from a list of PSPs vetted and approved by Amazon. While this may sound restrictive, in reality Amazon already has 16 approved PSPs on the list with another 27 pending approval, so there is still plenty of choice for sellers.
“Amazon’s motivation on the PSP program is around ensuring that sellers on Amazon are high-quality sellers and Amazon can spot the bad actors,” says David Messenger, CEO of LianLian Global. “Scrutiny, post-Covid concerns about fake PPE, quality of goods or defective goods, all that is putting a lot more pressure on sellers to meet the right quality standards in addition to what they’ve been doing before.”
While the announcement by Amazon has created a lot of buzz in the marketplace seller community, most of the initial concern is being replaced with positive acknowledgement of this as an evolution of ecommerce, and that all sellers are being protected by Amazon’s good diligence. Given that 90% of marketplace sellers already use a PSP that is either approved or pending approval, this change will not be nearly as disruptive as initially believed by some.
OFX CEO Skander Malcolm maintains that the increased regulatory compliance and fraud prevention that Amazon’s Payment Service Provider Program brings is a reflection of how ecommerce has moved from “the gold rush stage” to “the quality phase”. “Amazon are clearly saying that our marketplace, at our size and with our valuation, needs to continue to grow. However, it’s just as important for us to have a very good reputation,” says Malcolm. “Therefore, whether it’s in the seller community or the PSP community, we are now really going to work exceptionally hard at making that marketplace the best marketplace, not just the biggest marketplace.”
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group