Amazon.com's decision to quietly shut down its digital wallet app last week shows an uncharacteristic caution on the part of the e-commerce giant. Merchants throughout the Web use the company's e-commerce services, but the mobile and digital payments world is considerably more cutthroat.

The move to discontinue the Amazon wallet app after a six-month test is in stark contrast to the 60% boost in consumer use of one-click Amazon Payments the company announced after the Cyber Monday online shopping event.

Because Amazon also noted that 25% of the Login and Pay with Amazon payments were made using a mobile device, it seemed as if a natural progression would be for Amazon Wallet to build on this success.

But Amazon Wallet was a considerably sparser product than Google Wallet, Softcard or Apple Pay. And even these more full-featured wallets, which can make contactless payments at the point of sale, are not guaranteed any success. Apple Pay is facing pushback from some major merchants, Google Wallet has reinvented itself several times, and Softcard recently laid off some of its workforce.

The fate of the Amazon Wallet may have been tied to its Fire Phone, a device that is generally considered a failure. Ultimately, Amazon is treating the wallet app as a learning experience.

Amazon "learned a great deal from the Amazon Wallet beta program and will look for ways to apply these lessons in the future as we continue to innovate on behalf of our customers," said Amazon spokesperson Tom Cook issued a statement.

This perspective, combined with the poor reception of its Local Register mobile card reader and the shuttering of its WebPay P2P service, might mean Amazon will limit its reach in mobile and digital payments, said Michael Carter, head of strategy and business development at Omaha, Neb.-based Prairie Cloudware, a company focused on helping banks develop mobile wallets.

“They are not the first ones to learn that payments are hard,” Carter said of Amazon. “Google went cold and hot on the mobile wallet for some time.”

These troubles are not unique to Amazon's ecosystem or Google's complexity. The fact remains that Amazon set many of the expectations that other companies aspire to meet in e-commerce payments. For example, PayPal and Venmo's One Touch mobile payment system clearly benefits from the habits Amazon established through its earlier one-click checkout process.

Many companies that would appear well-equipped to shift to digital payments encountered significant setbacks and failures. Visa's current attempt to tackle e-commerce, Visa Checkout, came about after the company shut off or rebranded earlier systems called Rightcliq and V.me.

Facebook, which already earned a significant amount of its revenue from payment-related services at the time of its IPO, failed to convert its social network's payment platform into a digital currency called Facebook Credits.

The long-established point of sale technology vendor Verifone launched a mobile card reader called Sail to compete with the startup Square, but eventually washed its hands of the product.

Even though these companies have considerable expertise in their own fields, in many cases they are starting fresh when they develop mobile and digital payment systems.

A successful payment system “looks like magic, but it’s not,” Carter said. “It is very difficult and complex.”

Because Apple touted its 800 million iTunes accounts as a barometer for its transition into Apple Pay, it seemed as though Amazon could similarly position its more than 30 million Amazon Prime accounts as a foundation for a mobile wallet.

Getting to the lofty numbers of iTunes may not be realistic, but considering the company reported that 10 million consumers purchased Amazon Prime during the 2014 holiday season alone, it's clear that Amazon has an enthusiastic and dedicated customer base. A $99 annual Amazon Prime membership provides free two-day shipping and access to streaming videos, music and e-books.

Payments already have a strong role in Amazon Web Services, in which the company offers its merchants an integrated application interface to exchange data on payments, orders, data listings and reports. As of December 2014, Amazon said its Web services operate on 1.4 million servers across 11 geographic regions.

Amazon was also an early adopter of systems that let consumers spend their credit card's reward points directly on an e-commerce site, replacing an earlier system of redeeming rewards through mailed vouchers. Amazon also maintains its own digital currency, called Amazon Coins, which is used to buy downloadable media on its Fire phone, tablets and set-top box.

Any of these products can be entryways to a mobile payment scheme, but the sunsetting of Amazon Wallet and WebPay, and the poor early reception of Local Register, suggest that Amazon is best equipped to support payment services most closely tied to its e-commerce services.

The numbers would reinforce those beliefs for Amazon, as the company said more than 2 billion units worldwide were ordered on Amazon in 2014 from its sellers and businesses of all sizes. Much of this business has been generated through the 65% growth in sellers using the Fulfillment by Amazon service, the company said. Sellers using FBA send their products to Amazon fulfillment centers for packaging, shipping and follow-up customer service.

“Amazon does a great job and is the gold standard for personalized shopping and easy checkout,” Carter said. “But when you start getting into the wallet space and digital payments, you discover that consumers want what they want, when they want it.”

Third-party mobile wallets put a technology company between the bank and its customers and, in the case of Apple Pay, the bank has to pay to offer the wallet, Carter added.

The end of the Amazon Wallet app is one of those signals that banks should hear loud and clear.

 

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