SEATTLE—Amazon.com is offering to pass along the discounts it gets on credit card fees to other retailers if they use its online payments service. The move is a new threat to PayPal Holdings Inc. and card-issuing banks, Bloomberg said.
“The move shows Amazon is willing to sacrifice the profitability of its payments system to spread its use,” Bloomberg said.
Issuers receive about 2% of a typical credit card transaction, or 24 cents for debit. But big stores such as Amazon and Walmart have long been able to negotiate lower rates for themselves based on their massive sales volume, Bloomberg noted.
Now, Amazon is offering to pass its discount along to smaller merchants if they agree to embrace its Amazon Pay service. Previously, online merchants using Amazon’s service have paid about 2.9% of each credit card transaction plus 30 cents, which is divvied up among Amazon, card issuers and payment networks. As part of its experiment, Amazon is offering to negotiate lower fees with merchants making long-term commitments to use the service, Bloomberg said.