GOLDMAN SACHS: Paypal is safe from Amazon -- for now

Amazon started its “Payments” platform in 2013, but it’s really taken off recently. With worries about Amazon taking over entire sectors, is the payment space safe?

As Amazon announced its intentions to buy Whole Foods, the term “Amazoned” was coined to describe the businesses that crumble when Amazon enters their sector.

Blue Apron is one good example. The food delivery company went public right after Amazon announced the Whole Foods deal, and its stock price has failed to get off the ground because of it.

Amazon has had a payments platform for years, but it’s only recently begun to gain traction against competitors in that sector.

According to Goldman Sachs, Amazon Payments processed about $US6 billion in 2016. Amazon Payments is a platform that lets third-party retailers add Amazon’s checkout system to their sites to ease friction for customers and hopefully increase sales. Amazon takes a cut of the payments made through the platform, 2.9% domestically, in addition to a flat $US0.30 per transaction, according to Goldman.

The service is widely popular and growing quickly. In 2015, the volume of payments made on Amazon’s platform grew 150%, going on to grow 100% in 2016. More than 50% of the total payments made through the platform were from loyal Amazon Prime members, according to Goldman.

This rapid growth typical to Amazon is what worries investors in other industries. Drug stores, grocers and others all buckled when Amazon announced the Whole Foods deal. Goldman Sachs, however, thinks that Amazon’s biggest rival in the payments space, Paypal, is safe for now.

Paypal’s transaction volume dwarfs Amazon’s. In 2016, the company processed about $US336 billion, excluding its popular Venmo platform. In other words, Paypal is currently 59.6 times larger than Amazon Payments, according to Goldman Sachs.

Besides volume, Paypal has more big partners than Amazon does. Paypal is available on 14 of the top 20 online US merchants, while Amazon Payments is only available on one platform on the list: Amazon itself.

Paypal also isn’t slowing down as Amazon grows. The company added 19 million active accounts in 2016 and the average payment made on the platform has grown every year since 2007.

If Amazon wanted to make bigger moves against its biggest payment rival, Goldman Sachs said the company can begin offering rewards for customers that chose Amazon Payments over Paypal. Paypal is also available at 90% of the places that Amazon Payments is, and offering incentives to chose Amazon over Paypal could move market share toward Amazon.

Paypal is up 45.44% this year and Amazon is up 30.64%.

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