Recently, there has been much talk on the entrance of large companies into the financial technology space, with companies such as Apple and Google entering into the payments arena and potentially looking to expand their businesses. However, according to a recent analysis by a VC partner at Andreessen Horowitz, Amazon may be the next large player to enter the marketplace.
One of the major explanations that the analysis gives is that Amazon specializes in low-margin, high quantity businesses. The company is able to add tremendous value and revenue by cross selling products across its different businesses to customers. This explanation offers a unique perspective that certainly rings true with Amazon’s current business model.
A key aspect that the partner mentioned in his analysis was the ability of the company to differentiate itself from its competitors. In the context of Amazon, this would likely come across in the form of platform portability, unmatched pricing and incredible scale.
Another driving point that the analysis went into is the fact that Amazon as a company is already designed on a primarily low-margin business. Payment processing is an incredibly low-margin business that reaches profitability when large quantities of transactions are conducted using the service, or if the provider has an alternate revenue model.
Overall, the thought of Amazon entering the payment processing market would push the company to expand beyond its core business areas, but would align with the operational balance that it currently supports.
Source: http://fortune.com/2017/02/14/andreessen-horowitz-fintech-alex-rampell-amazon/