Most of the payments chatter last week focused on Fidelity National Information Services' (NYSE:FIS) mega acquisition of Worldpay (NYSE:WP). The topic of conversation was the inevitable consolidation of the payments sector, as scale becomes critical to optimizing the payments experience and innovating new payments flows.
Another piece of Worldpay news broke last week that has as much potential to innovate new payments flows and shape the direction of commerce in the decade of the 20s, now only nine months away.
It was announced on March 20 that Worldpay would become the first merchant acquirer to enable Amazon Pay (NASDAQ:AMZN) as a payment tender type.
As the largest merchant acquirer in the world, that in itself was news.
In the conversation I had with Amazon Pay and Worldpay executives about the partnership, both said simplifying merchant onboarding and working through things like chargebacks, fraud, disputes and refunds - all of the complexities that only make payments look easy to the end user - was their first and highest priority.
And they added that, although nothing in payments is ever as easy as "flipping a switch," they had worked very hard to make the Amazon Pay onboarding experience as easy as possible.
Then, my thoughts immediately jumped to the opportunities this new tender type could create for online merchants down the road.
One-click checkout could give way to a "one-click commerce" experience, including with Alexa and her growing voice commerce ecosystem, across a variety of connected endpoints and a growing number of connected devices.
Given that there are 300 million Amazon users worldwide - whose habitual use of Amazon Pay inside of Amazon has driven its growth to 50 percent of eCommerce volume - presenting Amazon Pay as an option on merchant websites could attract and convert more browsers into buyers.
Giving merchants the chance to integrate more fully with Amazon's logistics network to meet the consumer's expectation of getting things shipped to them for free - same-day, next-day or two days later - could reduce what has become a costly pain point.
All things that could get merchants to come around to the "if you can't beat 'em, join 'em" mentality, in what is now a very challenging retail environment.
Before you say, "no way, Jose," keep in mind that Discover (NYSE:DFS) ignited the fourth (and last) U.S. card network in 1985 by turning a merchant's cardholder base - 25 million Sears customers - into Discover cardholders by letting them use those cards at other merchants. There was the same talk then about retailers not letting consumers use a payment card owned by their largest rival.
The low-hanging fruit for Amazon Pay and Worldpay is, of course, to bring a familiar online payment method to lots of online retailers across categories like clothing, shoes, accessories, sporting goods, electronics and home furnishings.
Those are also the segments in which Amazon is growing market share inside its marketplace, where Amazon Pay could offer merchants an additional payments tender, as well as a built-in customer base.
But that's not where Amazon Pay, with Worldpay, has the potential to make the biggest impact.
That would be in one of the biggest categories of consumer spend, besides housing and healthcare.
All food - not just food purchased in the grocery store, but also food ordered from restaurants, and sometimes even eaten there.
A sector in which Amazon Pay could tap into Worldpay's integrated restaurant payments and quite possibly create a consistent payments and commerce experience across all consumer touchpoints using the same method of payment.
Because Everyone Has to Eat
Jeff Bezos launched Amazon in 1995 as an online seller of books for one reason: Everyone bought them.
In the nascent days of online retail, getting a critical mass of consumers onto the platform meant selling them something with mass appeal. Other categories followed, including music, electronics, sporting goods, toys - and even shoes, with the acquisition of Zappos. All of that served as a cornerstone to getting the now-famous "Amazon flywheel" moving.
Food fits that category, too, but comes with a much heavier lift as just an online player.
Before August 2017 (when the June 2017 Whole Foods acquisition closed), Amazon was making a dent in the grocery category, but a small one.
Amazon Pantry and Dash buttons (physical and virtual) were starting to ever-so-slowly shift the purchase of grocery staples regularly bought online. Amazon Fresh, now known as Prime Now, was launched as a subscription grocery delivery service available in some U.S. cities.
Still, it was a slow go.
Revving up the food flywheel required Amazon to move more aggressively into the environment where consumers still make most of their goods purchases: the grocery store.
August 2019 will mark the two-year anniversary of Amazon's Whole Foods acquisition.
Even though the Amazon Pay/Worldpay partnership announcement said the initial focus was on digital, it wouldn't surprise me if Amazon Pay wasn't on Whole Foods' near-term roadmap - maybe even in time for their two-year anniversary celebration.
Whole Foods is a Worldpay merchant, and Amazon Prime customers today get all the benefits of Prime member discounts at checkout - with the exception of using Amazon Pay to check out.
Whenever that happens - and it's just a matter of time - it doesn't seem like much of a stretch to put two and two together to get five.
Grocery shopping is a friction for most who do it. For Amazon, it's an opportunity to capture more consumer spend on groceries by making it easier for consumers to order and pay across the many touchpoints of their Whole Foods shopping experience. And in the future, that will include the smaller-format stores expected to open in U.S. cities over the next three years.
The lynchpin of that experience would be the consumer's ability to use Amazon Pay in a merchant app - Whole Foods - to track and manage their grocery purchases. And a virtual assistant that can also remind consumers when it's time to reorder and offer suggestions on products to try.
It could even lead to becoming a template for how Amazon Pay and merchant-powered apps and experiences could play out in other verticals.
Letting Amazon Pay the Check
Then there's food ordered from restaurants.
I admit that I had high expectations of Amazon Restaurants when it was announced in 2015.
Wait, was that four years ago already? Time flies.
It seemed like a no-brainer to me - an opportunity for Amazon users and restaurant brands to create an order-ahead and delivery experience without having to download a branded restaurant app or use an aggregator - all from the Amazon site.
It also happened to be a retail category where Amazon as a competitor wasn't much of an issue, but where Amazon as potential commerce-enabler using Amazon Pay might be viewed as a positive.
It was also a time when order-ahead and delivery was just gaining steam, even though Seamless and Grubhub (NYSE:GRUB) had been at it for more than a decade. In 2015, Uber Eats was a year old, Postmates (POSTM) was four and DoorDash (DOORD) was two.
Over those four years, it has been reported that Amazon has attracted more than 7,000 restaurants to its platform.
But that's peanuts compared to the competition.
Uber Eats and DoorDash each count 200,000 establishments worldwide; Grubhub has 105,000 across 2,000 U.S. cities. Meanwhile, Amazon Restaurants shut down its service in the U.K. in 2018, claiming strong competitive headwinds.
The Worldpay partnership could reverse that course at a point in time when market dynamics around restaurant ordering and payment are now more clear, and restaurant operators are feeling the pressure to make some tough decisions.
Today, restaurant operators are dealing with their own version of what retail has dubbed the "Amazon experience." Aggregators like Uber Eats, Grubhub and DoorDash sit between the restaurant brand and their customer, where they believe their customer relationships are in jeopardy.
These operators now find themselves caught between the proverbial rock and a hard place, as they balance the need to acquire new customers and the risk of not being present on the platforms where their competition lies, or not having the ability to provide a convenient ordering and delivery experience using a customer-focused intermediary.
Today, many restaurant operators hold their noses and hope for the best.
Could the "best" could come in the form of a Worldpay, Amazon pay partnership?
Maybe. And who knows in what format. There are innovators, including some of the existing aggregators and order ahead platforms, that all recognize the issues facing restaurant operators and are crafting solutions to give restaurants better customer-centric alternatives - particularly those that help restaurants preserve their brand affinity and loyalty options with their customers. Working in combination with those players could ignite a new "Eats" platform that brings all of those respective assets to restaurants and their customers.
It's also not such a crazy idea. Reinventing categories using payments is what Amazon does. Amazon Pay and Worldpay also come with installed bases on either side of the restaurant order and pay platform - users with payment credentials and restaurants and POS systems enabled to accept Amazon Pay. It's also where some restaurant operators already have their heads.
Our latest Restaurant Readiness Index surveyed QSR operators and consumers about their satisfaction with and preferences for payment types used at those establishments. Nearly three-quarters of those operators expressed a preference for Amazon Pay, as did half of the 2,000 consumers we surveyed.
Only debit, credit, cash, gift cards and QSR prepaid cards fared higher, in a sector where very few establishments even accept Amazon Pay today.
Hungry for Disruption
Food is a category that is being disrupted in its own right.
The lines are blurring every which way around how and where food is purchased, and how and where it is consumed.
There are fewer bright lines between consumer spend on food purchased at the grocery store, to eat at home, and consumer spend on food purchased outside of the home to be eaten at a restaurant. It's all now just food.
Innovations in apps, tech and digital payments have introduced the consumer to new ways to pay for food, and new options for where it is ordered and eaten. Prepared foods bought in the grocery store bite into restaurant and traditional grocery food spend. Further, it's been reported that 63 percent of all food purchased from a restaurant isn't eaten there. Naturally, that includes food purchased at QSRs where most people take their order away, but increasingly includes order-ahead for food to be picked up or delivered to be eaten at home.
Food, and restaurants in particular, is where we've seen some of the most interesting payments innovations happen for the same reasons Jeff Bezos targeted books 24 years ago: Everybody eats, and they usually do so at least three times a day.
The purchase frequency, loyalty and habituation that has created - and the need to eliminate friction by building convenience into the order and payments experience - has given us a real-time look into how consumers are, or are not, using mobile and digital payments to order and pay, and into what it takes to build the unbreakable habits of loyalty and brand affinity.
Could Amazon Pay, together with Worldpay, use food and the universal appeal that it has to reinvent how consumers order and buy food?
And with it, deliver the same consumer experience across those commerce endpoints - commerce without the need to stick "omni" in front of it?
Only time will tell.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.