Amazon FPS – is this the micropayment revolution?

Amazon.com has announced the beta release of the Flexible Payment Service, an addition to the range of web services which already includes on-demand computing (Elastic Compute Cloud) and Simple Storage (Amazon S3).

At first glance, this looks like big news for the Internet. It bears all the Amazon hallmarks: low price, developer-friendly, and easy to adopt. Here’s the pricing:

For Transactions >= $10:

  • 1.5% + $0.01 for Amazon Payments balance transfers
  • 2.0% + $0.05 for bank account debits
  • 2.9% + $0.30 for credit card

For Transactions < $10:

  • 1.5% + $0.01 for Amazon Payments balance transfers
  • 2.0% + $0.05 for bank account debits
  • 5.0% + $0.05 for credit card

For Amazon Payments balance transfers < $0.05:

  • 20% of the transaction amount, with a minimum fee of $0.0025

There is no up-front fee. All these prices are reasonable, but the last one deserves particular scrutiny. If both buyer and seller have an Amazon Payments account, then you can receive a tiny payment at a realistic cost. You could even pay me a single cent, three-quarters of which I would get to keep.

Now look at PayPal’s fees. $0.30 fee plus a percentage for any transaction. Google Checkout? Complex, because Google wants to hook you into its AdWords advertising by giving free transactions up to a proportion of your AdWords spend, and because it is subsidizing the service to buy market share from PayPal. But the fees include $0.20 per transaction plus a percentage, which means you cannot do micropayments.

Amazon FPS is based on web services, so that developers can easily build it into their web applications.

FPS is interesting to me as a writer. It means I could self-publish and change a small amount per article – maybe just a few pennies. It is also interesting as a means of monetizing web services. A neat feature is that buyers can limit their risk by specifying both transaction limits and the total amount transferred over a period, for a particular recipient.

If Amazon FPS takes off, then Amazon becomes a major identify provider (because you will use your Amazon ID for payments to third-party sites) as well as becoming an Internet bank.

I think Amazon is a sufficiently well-trusted name that this could work. I should add, though, that nobody is sure of the significance of micropayments – we’ve just speculated that they might be a key enabler of (ugh) Business 2.0. See Wikipedia for a discussion and links. So far, it has been advertising rather than micropayments that has changed the game. But that was before Amazon FPS. What do you think?

PS – see Jeff Barr’s post for more information and early adopter examples.

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1 comment to Amazon FPS – is this the micropayment revolution?

  • One of those early adopters here to say hi! FreshBooks is one of the handful of “chosen ones” for early integration, we’ve posted on our experiences and impressions here:

    http://www.freshbooks.com/blog/2007/08/03/amazon-flexible-payment-service/

    It’s been an interesting ride so far, always a neat experience to be involved with anything brand new like this. I think FPS will be a real game-changer, because it makes online payment affordable for everyone. And if anybody can pull this off and topple PayPal’s supremacy, I think it’s Amazon… just think how many payments they already process each day.

    Our integration is coming along great, should be wrapped up shortly! We’ll be proud to be one of the first to offer this service to our users.