Amazon joins Google in assault on eBay's PayPal

As eBay continues to fight off calls for the addition of Google Checkout to its online marketplace, here comes another big-name PayPal alternative.

Today, on its web services blog, Amazon announced a limited beta version of a long-rumored online payment system, dubbed the Amazon Flexible Payments Service, or FPS. Aimed at developers looking to build their own internet-driven businesses, this new set of web service APIs allows the exchange of funds via credit cards and bank accounts as well as "Amazon Payments" accounts.

"The 'good idea' has become a reality and developers now have yet another way to build scalable, profitable online businesses," wrote Amazon's Jeff Barr, in a blog post entitled "Ka-Ching!" "We've taken all that we know about dealing with credit cards, bank accounts, fraud checking, and customer service and wrapped it all up into one convenient package."

Yes, third-party sellers can already collect payments through the existing Amazon Payments system. But Payments is only an option if you're selling goods on Amazon.com. FPS enables payment collection on third-party sites as well, and like Payments, it allows buyers to transfer funds via their existing Amazon accounts, so they don't have to re-enter all their personal information on another site.

"Seriously," Barr told web developers everywhere, "the 69 million active Amazon.com customers can now use FPS to pay for the applications that you'll undoubtedly want to build."

The big question is whether eBay will allow the use of Amazon's new service alongside its own PayPal service. The world's most famous online auction site currently bans the use of Google Checkout, arguing that a payment service isn't suitable unless it has a "substantial historical track record of providing safe and reliable financial and/or banking related services." The Google payment system launched in June of 2006.

Last month, Google planned an alcohol-fueled bash in protest of eBay's stance on Google Checkout - in the midst of eBay's annual sellers conference. But the party was promptly canceled after eBay yanked its ads from Google's ad network.

Amazon's FPS carries no start-up fees or minimum charges. Sellers are charged on a per-transaction basis, depending on the size of the transaction and the payment method. If the buyer uses a bank account to pay $10 or more, for instance, Amazon charges the seller two per cent of the payment plus an extra five cents. Amazon's cut is lower if an Amazon Payments account is used, a bit higher for credit cards. Google Checkout is currently free, but per-transaction charges will kick in on January 1.

FPS also handles micro-payments (via Amazon Payment accounts), letting sellers collect payments as small as a single cent. For any payment under five cents, Amazon takes a 20 per cent cut, with a minimum fee of one quarter of one cent.

This significantly beats current PayPal charges for micro-payments. In fact, PayPal supports micro-payments in name only. With eBay's service, the minimum fee is a five per cent cut plus an extra five cents. That doesn't really make sense for payments of less than a dollar.

Current FPS beta tester FreshBooks is ecstatic: "Bring back the penny candies, because this changes the game for the entire web. There may have been micropayment solutions before, but none backed by a major trustworthy player like Amazon."

Of course, that's what you'd expect from a close Amazon partner. ®