At first glance, Baird’s analysts believe Amazon.com, Inc. (NASDAQ:AMZN)’s reported acquisition of GoPago is indicative of the blurring lines between marketplaces and payments, and “closing the loop” between shopping and paying. They suspect Amazon is building out enhanced payment functionality to enable a larger share of mobile commerce, and by extension, to address competition from Square, PayPal, Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL). More speculatively, Amazon.com, Inc. (NASDAQ:AMZN) may expand its 3P Marketplace to physical store inventory, or even open its own stores.
Background
Last week, GoPago’s CTO suggested on Facebook that Amazon.com, Inc. (NASDAQ:AMZN) acquired the payment start-up. GoPago is a San Francisco based payments company comprised of 1) consumer mobile ordering and payment apps; and 2) a cloud-based mobile payment and integrated POS (point-of-sale) system for merchants (mostly restaurants). Analysts believe that competition has intensified rapidly, including PayPal’s recent mobile upgrades and integration with Eat24, while the POS market is increasingly crowded with Square, iZettle, PayPal Here, Google Checkout, Breadcrumb (Groupon), Clover (First Data) and Intuit, among others. In addition, they believe that a number of emerging payment companies face challenges to fund ambitious product and distribution initiatives, in addition to creating viable direct sales channels.
Amazon’s motives
Analysts note that Amazon.com, Inc. (NASDAQ:AMZN)’s payment solutions have limited traction off of its own site, in large part due to hesitation among merchants to provide the company with access to customer and transactional data (channel conflict). While the plans for GoPago are not entirely clear, it seems reasonable that Amazon’s own ambitions in Mobile commerce are a high priority, and with almost every other large-scale Commerce platform combining elements of marketplace and payments: Square, Google, PayPal/eBay and Groupon as notable examples, and Apple Inc. (NASDAQ:AAPL) probably not far behind. In this scenario, Amazon.com, Inc. (NASDAQ:AMZN) can clearly leverage existing small merchant relationships with GoPago. Other use cases would include Amazon opening up its third-party (3P) marketplace to in-store product inventory; or more speculatively, plans to roll out Amazon stores.
Competitive implications
Large web platform companies building advanced capabilities in mobile payments and POS systems pose the most immediate challenge to smaller scale and emerging online payment companies, in analysts view. Over time, they also see existing marketplace battles extending to payments, with Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY)/PayPal, Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) being the most likely to succeed.
