Amazon makes discount offer small retailers might not refuse

Amazon.com is offering to pass along the discounts it gets on credit-card fees to other retailers if they use its online payments service, according to people with knowledge of the matter, in a new threat to PayPal Holdings and card-issuing banks.

The move shows Amazon is willing to sacrifice the profitability of its payments system to spread its use.

Swipe fees are a $90 billion-a-year business for lenders such as JPMorgan Chase & Co. and Citigroup, networks including Visa and Mastercard, and payment processors like First Data and Stripe, which pocket a fraction of every sale when shoppers swipe cards or click “buy now.”

The financial industry’s fees amount to about 2 percent of a typical credit-card transaction, or 24 cents for debit.

But big stores such as Amazon and Walmart Inc. have long been able to negotiate lower rates for themselves based on their massive sales volume.

Now, Amazon is offering to pass its discount along to at least some smaller merchants if they agree to embrace its Amazon Pay service, said those, who asked not to be identified because they aren’t authorized to discuss the plan publicly.

It couldn’t be determined how many retailers have received Ama-

zon’s offer for discounts. The company typically tests such initiatives before rolling them out broadly.

Previously, online merchants using Amazon’s service have paid about 2.9 percent of each credit-card transaction plus 30 cents, divvied up among Amazon, card issuers and payment networks.

As part of its experiment, Amazon is offering to negotiate lower fees with merchants making long-term commitments to use the service, according to one person familiar with the matter.

But merchants aren’t eager to share too much information with Amazon, which may compete with them to sell similar products on its own site.

Amazon dominates the U.S. e-commerce market, with 43.5 percent of all sales in 2017, according to EMarketer Inc. PayPal has emphasized its status as a nonretail competitor to differentiate itself.

Amazon Pay is among many products the company offers to get a piece of other retailers’ e-commerce revenue.

Merchants selling goods on their own websites can let Amazon handle warehousing, packing and shipping for a fee. Many find it cheaper to pay Amazon for logistics than do it on their own because they benefit from Amazon’s volume shipping discounts.

Amazon’s move is part of an escalating battle in the U.S. between traditional financial firms and tech giants to develop a dominant digital payments system.