Amazon opens payment system to other Web sites

LOS ANGELES (Reuters) - has opened its payment system to other Web sites in a move that would pit it against eBay’s PayPal.

The program, called Amazon Flexible Payment Service, was launched on Friday in an initial testing period, Amazon said on Monday.

Customers of, the largest internet retailer in the world, can already purchase goods through third-party sellers. Now, software developers operating their own Web sites can choose to use Amazon’s payment system.

The payment system operates under the umbrella of Amazon Web Services, a relatively new division of the online retailer that allows start-ups as well as established businesses to rent Amazon’s computing and other Web services on demand.

Amazon customers use their passwords and payment information on file to pay for goods and services ordered on these third-party Web sites -- even if they access these sites without first going on

Stifel Nicolaus analyst Scott Devitt wrote in a note published on Monday that he anticipates alternative payments to be one of the most active areas in the online retail sector for the next several years.

The Amazon service competes with PayPal and beyond, he said.

“In the long term, we believe that the card companies and certain categories in the traditional retail channel have the most to fear about the activities by technology-driven online innovation,” Devitt wrote.

Deutsche Bank analyst Jeetil Patel wrote in a note published on Sunday that Amazon’s pricing model on bank debit transactions has a lower markup than PayPal.

The new program will allow Amazon to attract and retain new customers, while better understanding consumer purchasing behaviour for future marketing opportunities, Patel wrote.

The program allows third parties flexibility, with the capability to send and receive money using credit cards, bank accounts or an Amazon Payments balance transfer, with Amazon receiving a fee for every transaction.

Amazon shares rose $2.20 to $79.00 during regular trade on Nasdaq.