Amazon, Uber and Jumpstarting Mobile Payments Growth

I’ve drawn the comparison between Amazon and Uber quite a few times in the past, mostly from a marketplace perspective. Due to Uber’s moves in the autonomous vehicle market and its UberEats and UberRush initiatives, the service is seen as a logistics company, much like Amazon. Another area where Uber and Amazon share similarities is friction-less payments. As Tim O’Reilly pointed out in this September 2014 blog post:

I never search for my wallet when I take an Uber…I never search for my wallet when I buy something from Amazon.

Uber's “Tap a button, get a car!” slogan is a strikingly similar experience to Amazon's “1-Click” value proposition. The beauty of these experiences is the lack of friction. It’s the perfect marriage of intent and action with no additional steps in between. Uber and other ride-sharing services (Lyft, Gett, etc.) rely on payments, identity and logistics to create a seamless, on-demand experience, but can they be considered payments and identity companies in the vain of Amazon?

Amazon’s Payments and Identity Prowess

Beyond being the “Everything” Store, Amazon has increasingly become the “Identity” Store, combining payments and identity to perfect the e-commerce checkout experience. Since 2013, 23 million Amazon customers have used Pay with Amazon on 3rd-party retailers’ websites. That’s an impressive 8% of Amazon’s customer base that has opted for the convenience of Amazon Payments over inputting their credit card information or using services such as PayPal.

How was Amazon able to become a major player in payments and identity for 3rd-party retailers? By creating an customer experience on Amazon propertiesthat was enviable enough for small and medium-sized ecommerce companies to bring it to their own websites, as I wrote in The Identity Store:

As Patrick Gauthier, Amazon’s VP of External Payments, put it, “ Check-in is the new Checkout.” The ability for merchants to rely on Amazon for check-in, checkout and fulfillment on the website “removes friction from the customer and provides merchants with valuable information that they never before had.”

Essentially, Amazon has created “Amazon as a Service” or (AaaS) with customer identity and insights as the centerpieces.

Amazon is first and foremost an ecommerce retailer and as an ecommerce retailer, the company felt the pain of checkout friction and the lack of customer insights to guide product strategy. Over the years, Amazon addressed these issues by optimizing their checkout experience with the launch of 1-Click in 1997 and owning the customer relationship (and identity) with the launch of Amazon Prime in 2005. Amazon became a dominant payments and identity company by:

1. Introducing friction-less payments;
2. Owning the customer relationship and identity; and
3. Providing each of those services to third-parties.

How Do Ride-sharing Services Measure Up?

Amazon’s trajectory can be instructive for determining whether ride-sharing services can be considered payments and identity companies. Let’s apply each one of the three previous factors to ride-sharing services, specifically Uber and Lyft.

Friction-less Payments

• Both Uber and Lyft fit the bill here. From the rider perspective, payment is a seamless experience in the background.

Customer Relationship and Identity

• Due to the highly subsidized nature and low switching costs of ride-sharing services, no service owns the customer relationship.
• In a highly commoditized market like ride-sharing, customers choose on price. This leaves brand affinity and loyalty as the only true differentiator in the customer relationship.
• Uber has pulled ahead Lyft in the brand loyalty department, partnering with Visa to launch Uber Local Offers. Local Offers is a loyalty program that rewards riders with Uber points for using a Visa credit card to shop at local merchants on the Visa Commerce Network. This partnership allows Uber to build brand loyalty with both merchants and consumers, each of whom are potential Uber customers across multiple services (more on that later).
• While Lyft has launched a loyalty partnership with Starbucks, that partnership is nowhere near the scale and significance of the Uber-Visa deal.

External Services for Third-Parties

• Uber has been steadily expanding its third-party services for local merchants with products like UberEats and UberRush. These services give Uber the opportunity create additional revenue lines with the same workforce, adding no additional costs.
• Consumers can use UberEats for on-demand food delivery and UberRush for same-day delivery of goods from local merchants. While the services are still small-scale, they offer Uber revenue potential in regions where density is low and there is less demand for ride-sharing.
• As its logistics services continue to grow and traction, Uber may be able to parlay that into deeper payments and identity partnerships with merchants.
• Lyft has yet to offer services beyond ride-sharing.

Jury is Still Out

Amazon is a once-in-a-generation company that is head and shoulders above all other competitors in its industry. It is has built a impressive reputation through winning on price and customer experience, two areas where ride-sharing services have had a hard time differentiating themselves. Leveraging Amazon’s three factors for success in payments and identity may ultimately prove the differentiation

While ride-sharing services, specifically Uber, hit the mark on friction-less payments and the potential for third-party services, no ride-sharing service has a solid grasp on the customer relationship or identity. That is most likely due to the nature of consumers’ relationships with transportation services in general.

As ride-sharing services continue to diversify their offerings and make brand loyalty and value a focal point of the customer experience, we may see a shift in the customer relationship dynamic. The consolidation of the ride-sharing market via shutdowns or acquisitions may also open the door for a ride-sharing service, most likely Uber, to emerge as a major player in payments and identity.

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