Amazon WebPay: a valuable lesson for FS providers

From today, customers logging into Amazon’s peer-to-peer (P2P) payments system, WebPay, will unfortunately be in for a nasty surprise. The system – which enabled users to transfer money between friends, family and other individuals using their email address and the Amazon Payments webpage – was shut down by the technology giant on 13th October 2014.

Amazon explained its decision in an email to the service’s remaining customers a week before shutting the service down, saying:

“We are not addressing a customer pain point particularly better than anyone else. We’ve learned a great deal about how and when customers want to send money and will look for ways to use these lessons in the future.”

The importance of solving a customer ‘pain point’, as Amazon has highlighted here, is crucial. Amazon’s WebPay couldn’t find a way to differentiate itself or position the service as viable option against competing products. Taken alongside Google's wasted $300m investment in Google Wallet, perhaps established technology players are starting to discover that a move into payments is harder than first imagined.

A system that has fared much better is the Payments Council’s Paym service. Launched in April 2014, Paym lets people make payments to friends and family using nothing more than their phone number. By using mobile phone numbers to identify recipients, Paym eliminates the need for senders to know recipients' banking details, and makes the whole process of transferring money as easy as possible.

This week, First Direct joined the scheme, while Clydesdale Bank, Isle of Man Bank, NatWest, Royal Bank of Scotland, Ulster Bank and Yorkshire Bank confirmed they would join Paym before the end of 2014. Since launching in April this year, 1,450,000 customers have registered for Paym with their bank or building society. The service’s planned expansion will make it available to more than 40 million users by the end of the year – representing more than nine out of ten UK current accounts.

The system’s simplicity is what’s been key to its success, particularly with young people. Research we carried out in advance of Paym’s launch showed over four million 18-30 year olds were already interested in transferring money to friends and family via a mobile number. Younger consumers are ready and willing to embrace any technology that makes managing their finances easier. 

There’s an important lesson financial services providers can take from Paym’s success and the end of Amazon WebPay, which is that any financial services product should provide customers with easier, more flexible and accessible money management. A study by CB Insights this week found that when questioned as to why their start-up had failed, 42% of entrepreneurs cited their idea failed to meet a customer need. Whenever developing a new product or making a change to an existing system, financial services providers need to ask themselves what problem they are solving, and how they are improving the user experience for their customers.

Were Amazon right to give up on WebPay, or should the company have strived to improve it?