Amazon + Clover Is Likely A Blessing And A Curse

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Last year Amazon and Clover inked a deal allowing Clover merchants onto Amazon’s Pay Places platform.

Formerly known as Pay with Amazon, Amazon Pay lets customers use their Amazon accounts to pay on sites beyond Amazon.com. Amazon Pay competes with PayPal and other third-party payment services.

Amazon’s takes a 10% commission fee to direct and process the mobile order, but in theory it allows merchants another integrated channel to take orders, as consumers are much more likely to order from an aggregator than a merchant’s own website. There is still the operational complexity in managing the orders and rate throttling so as not to back up the kitchen, but those are beyond the scope of most online ordering providers.

This partnership demonstrates a few things.

First, the importance of an API. API integration is critical to extend the functionality of a POS. APIs are non-existent in many legacy POS environments because the ISV couldn’t bother to invest a trivial amount of money in their own solution. Many payments companies, who have since bought the legacy ISVs, are investing this money to keep the asset relevant and are building out APIs.

Second, Amazon is cleverly growing its reach. Unlike many other providers, Amazon is a software and data company who happened to get into retailing. As such they are very keen on consuming any data they can get their hands on. Any merchant who uses Amazon Pay will undoubtedly be sharing their customer and transaction-level data with Amazon. That poses a problem since Amazon is coincidentally in the business of selling food in their Whole Foods division. Eventually Amazon is going to use all this data to seriously disrupt the restaurant business, whether it’s a meal kits factory or autonomous restaurants that can predict consumer preferences before restaurants are even aware of market trends. Amazon already caught heat doing this once before with their own ecommerce listings.

Third, and now-unsurprisingly, is First Data’s continued efforts to be a hardware and payments company with little software or data chops. First Data could have built a massive, aggregate online ordering portal for all their restaurants – probably 30,000+ in number at this point – and found ways to syndicate that for free. First Data could have built the logic to throttle orders, making a complete software solution end-to-end. But First Data doesn’t want to do that, likely because they’ve realized it doesn’t have the culture to compete on software or data.

Considering where all markets are heading (i.e. using data as your moat) it’s awing to see First Data totally asleep at the switch. The same could be said for the majority of companies everywhere though, which is why you can’t question how companies with software and data cultures have come to dominate the market (Facebook, Google, Amazon).

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