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Wednesday, 13 May 2009

Can Amazon be the default payment API for the Web?

The Web badly needs a default payment mechanism. Victor Keegan of the Guardian made a very good point about the importance of payment to a health economic system:

Lots of economists argue that the digital economy - in which the cost of producing extra units is zero - is forcing prices towards zero. Poppycock. If you look at the three main arms of the digital world, it is only the web that has trouble making prices stick. The other two - mobile phones and virtual worlds (where all goods are digital) - have flourishing economies. Why?

Because the internet arrived in this world without a micropayment system, whereas the other two have them built in. This is why kids who don't pay for music online will pay £2.50 for a ringtone, why emails are free but text messages can cost 25p. It's why SeeMeTV pays users for uploading their videos to phones while YouTube doesn't. Flirtomatic sold nearly $1.5m (£1m) of virtual roses in 2007 and Second Life expects virtual transactions to soar from $350m last year to $450m in 2009.

One thing about payment is making it easy. On the iPhone, once you have entered your credit card number, you are good to go. Buying is then as simple as touching the purchase button. If we take this to the Web, which company has our credit card and our trust? Amazon. It is much easier to buy from Amazon than to go to a bookstore.

Mark Cuban made the same point when he says that newspapers need to get the credit card numbers of their readers in their database. But newspaper are already late into the game. Amazon has the best chance of scaling their payment across the Web. They have done so for the rest of their infrastructure. Why not payment?