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Amazon Unveils its Answer to Apple Pay

It is now possible for a few customers to pay with Amazon Pay at some brick and mortar restaurants.

A feature called Amazon Pay Places; that allows customers to access their balances at brick and mortar stores, has been added to the digital wallet, TechCrunch reported. Pay Places is currently being tested at a few TGI Friday’s restaurants in Boston, Baltimore, Washington D.C., Richmond and Wilkes-Barre, Pennsylvania.

What We Don’t Know about Amazon Pay Places

Many important details about Amazon Pay Places are not available including how it communicates with cash registers. Currently two technologies are used for that; Near Field Communications (NFC) and Quick Read (QR) Code.

NFC apps like Apple Pay and Android Pay send a wireless signal to the cash register that makes the transaction in the merchant system. QR Code apps like Walmart Pay, Alipay and Chase Pay use the phone’s camera to scan an optical code. That enables the app to make the transaction in the payment processor’s system.

Both systems create a digital token that is supposed keep the transaction unique and secure. Big retailers like Walmart have been reluctant to accept NFC payment possibly for security reasons.

Why is Amazon Adding Brick and Mortar Payment?

The most likely reason why Amazon (NASDAQ: AMZN) is offering Pay Places is to enable the use of Amazon Pay at Whole Foods (NASDAQ: WFC). Since Amazon is trying to buy Whole foods that sounds logical.

This indicates that Pay Places might use NFC; because Whole Foods already accepts both Android Pay and Apple Pay. A likely development will be a test of Pay Places at Whole Foods or the Amazon store in the near future.

Another potential use of Amazon Pay Places would be to allow its users to get cash at Whole Foods and other Amazon brand stores. Since around 32% of transactions in the USA still involve cash according to The Federal Reserve Bank of San Francisco, this would be a huge selling point.

Amazon Pay is widely accepted online but not at brick and mortar stores. No physical merchants currently appear at the Amazon Pay website.

How Amazon would cash in on Wireless Payment

A major reason why Amazon is rolling the digital wallet out into the real world is to make money. Ant Financial; which operates Alipay, is one of the world’s most valuable private companies. Amazon is hoping to cash in on brick and mortar merchants because it charges 2.9% or 30¢ a transaction.

Another reason why Amazon is taking its payment app into the real world is to head off PayPal (NASDAQ: PYPL). PayPal now supports Android Pay which means its customers can now pay with their digital wallet balances through that App. Expect to see Apple and Alphabet try to counter this move by increasing the capabilities of their digital wallets.

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