October 7, 2021
How Amazon Payments Work: The Ultimate Guide
Amazon Pay first launched in 2007 and has since risen to become one of the most popular payment gateways in the world. Originally designed to allow Amazon sellers to accept payments from their own sites, Amazon Pay now has 33 million users. Plus, with direct integration into Alexa, it gives sellers with their own platforms the opportunity to offer simple voice sales and payments.
That is tempting for Amazon sellers expanding to new channels. For example, if you’re setting up a Shopify or WooCommerce account after selling on Amazon, Amazon Pay simplifies your multi-channel expansion, while providing you conversion tools to convince existing Amazon customers to shop with you off Amazon.
What is Amazon Pay?
Essentially, Amazon Pay is a digital wallet, much like Google or Apple Wallet. When users log in, they access payment data on file at Amazon and can then ship goods directly to saved addresses. That can significantly reduce time and hassle during checkout.
For example, customers won’t have to look for a credit card, or worry about data security, because Amazon processes everything inside its own code. You’ll receive a payment from Amazon and an address with the order — that’s it. Plus, by not having to stop and fill out addresses and other data, checkout is faster. That can improve conversion while decreasing shopping cart abandonment.
Plus, the Amazon Pay button integrates into nearly any website that offers HTML customization. All you have to do is paste in the embed code, and you can use Amazon Pay on WooCommerce, Shopify, and many other platforms. Most importantly, all that comes with no monthly fees, making it comparable to Stripe, Square, or other online checkout platforms.
Amazon Pay features
Amazon Pay also offers several features that many competitors don’t, for example, one-touch and fast checkout for any existing Amazon user. Although not everyone has an Amazon account, the marketplace has some 310 million active customer accounts. That rivals even the largest payment processor (i.e., PayPal, which has 392 million active users).
Amazon Pay allows customers to check out on any of your channels using the same payment information and data. They simply log in and pay without having to add payment preferences, addresses, or other details each time.
Amazon extends its product guarantee to some Amazon Pay customers – meaning your customers could benefit even on your own platform. That builds trust with them and likely increases your conversion rate without costing you anything. While Amazon normally extends their guarantee only to larger Amazon sellers and merchants, you likely have an Amazon account anyway if you’re considering using its payment service.
Juniper Research shows voice research and shopping already drive some $22 billion in commerce each year, and Alexa is a large part of that. Voice shopping is slowly, but surely taking off, especially as smart speaker adoption rises. In the current market, voice sales won’t make up a large percentage of your revenue, but Juniper expects sales to increase ten-fold within as many years.
Like other payment gateways, Amazon handles the payment encryption and processing, meaning you can offer customers secure payments. While any reputable payment gateway offers this, Amazon’s security takes it a step further to include any multi-authentication on the Amazon account and logging in using auto-fill data rather than inputting card numbers. This added level of security is comparable to a digital wallet, which makes customers feel more comfortable checking out on an unfamiliar website.
Amazon Pay provides multiple checkout and transaction options, including integrated recurring payments and subscriptions. That allows web shops a lot of flexibility to offer subscriptions, monthly boxes, or similar services.
- Immediate charge – Charges are immediately billed from the customer’s credit, debit, or Amazon card and debited to your account.
- Deferred payments – Charges are set as pending on an account and are debited following a product release or similar event. This means you can support pre-orders, back orders, etc., with deferrals of up to 180 days.
- Split payments – The customer pays the total amount in installments, split over a certain number of days. Split payments let you request up to 25 authorized payments in advance, with payments mapped against internal order references.
- Recurring payments – Customers can authorize recurring payments over periods of a year or more. These can be weekly, monthly, or even varied amounts per period, so customers can commit to a subscription however you want to sell it.
- Refunds – If a customer needs a refund, doing so with Amazon Pay is a simple matter of clicking a button. That can save you significant hassle in case customers do need money back.
Amazon Pay fees
Amazon Payments uses a fee structure much like any other payment gateway. If you sell on Amazon, it’s also probably familiar:
Domestic transactions – 2.9% transaction fee + a $0.30 authorization fee
Alexa fee – 4% transaction fee + a $0.30 authorization fee
International transaction fee – $3.9% transaction fee + $0.30 authorization fee
International Alexa fee – 5% + $0.30 authorization fee
Chargebacks – $20
Domestic refund – 2.9%
International refund – 3.9%
That’s more expensive than Stripe, which charges 1.4%–2.9% for most transactions. However, it’s cheaper than PayPal, which charges an average of 3.49% plus fixed fees starting at $0.49.
Setting up Amazon Pay
If you want to set up an Amazon Pay account, you have to start with an Amazon Payments Merchant Account. From there, sign-up is relatively simple:
- Sign up on Amazon Pay.
- Register on Seller Central (or log in using your existing account).
- Set up your Seller Central Account and confirm your payment information.
- Log into Pay.Amazon.com and go to “For Merchants.”
- Select the button type you need (specify the shopping cart provider/no shopping cart provider, website type, etc.).
- Log in to Seller Central and click “Integrations.”
- Set up your integration.
- Copy-paste your button code onto your website.
That’s it. You’ll have a working Amazon Pay account. If you don’t have anything set up, the full confirmation process might take a few days. If your Seller Central is already confirmed, you likely can have it up and running in a few hours.
Wrapping up — How Amazon payments work
Amazon Pay is a great payment gateway solution for brands already on Amazon that are moving to multi-channel. You might also want it if you’re catering to Amazon sellers, who might have less trust in an unknown website. Plus, if you’re already on Amazon, using it to accept payments simplifies total payment processing. That may be a perk, depending on where and how you sell, but it’s just one of many advantages of Amazon Pay.