Last week, Bloomberg.com reported that Amazon.com’s “Amazon Payments” unit is working on a mobile solution based on Near Field Communication (NFC). But an analysis of the potential business models and revenues strategy of Amazon all but precludes is as the sole strategy of Amazon. Here’s why:
Although NFC is certainly making the news these days, and multiple companies are positioning products and services leveraging NFC, Amazon.com is likely to have something better with significantly shorter lead-time.
According to Bloomberg:
Amazon.com Inc. (AMEN) is considering the introduction of a service that would let consumers pay for goods in brick-and-mortar stores using their mobile phones, according to two people with knowledge of the project.
The company’s Amazon Payments unit is exploring whether to start a service based on so-called near-field-communication technology, said the people, who asked not to be named because the project isn’t public. NFC lets devices transmit data such as payment information, loyalty points and coupons by tapping them against specially equipped cash registers.
But Amazon may not have to wait for NFC to be deployed before it launches a mobile commerce solution, because Amazon is one of the few companies that already have experience in computer-to-computer consumer checkout.
JACC (JUST ANOTHER CONNECTED COMPUTER)
Consider that the mobile phone is ‘just another connected computer’ (JACC) because it can connect to the internet at any time vis the mobile network, WiFi, etc.. Also, retail POS device is also a kind of JACC because it is connected via an IP address. Near Field Communication (NFC) allows these two connected computers to communicate back and forth with ease.
NFC essentially connects two computers together (in this case, a customer’s smart phone and a retailers POS device), allowing each computer to ask questions, and allowing the other to answer. Obviously, the Internet allows exactly the same thing, except that the Internet is not inherently wireless, like NFC.
Regardless, Amazon has been using the Internet to connect a customer’s laptop/PC to a retailer’s POS/servers for years, and they have developed a significant strength in this area making Amazon a natural fit for brick-and-mortar payments after we all have an NFC chip in our mobile phones. Amazon.com is likely to use its existing infrastructure to allow customer to have a similar shopping experience at a brick-and-mortar retailer that the customer experiences online at Amazon.com today, except with all of the fields filled out in advance (with the consumer’s permission, of course). And, Amazon has significant competence in managing its infrastructure; on its busiest day, Amazon.com processes about 8 million transactions. Compare that to the entire AMEX network in the US, which processes an average of about 10 million per day.
IN THE OUT DOOR
Essentially, it seems reasonable that Amazon.com would use the “back door” into each POS system which would hypothetically require only programming and partnerships, which would months, not the years it will take for mass adoption of NFC.
It is all part of the format war that is evolving on multiple levels in mobile payments and mobile commerce. It seems the ‘war’ will have more than one dimension, and every major player in telecom, internet sales, POS manufacturing, and payment processing wants a stake in this emerging system.
© 2011 David W. Schropfer
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