How the Amazon-Whole Foods Deal Could Work against PayPal



PayPal is vying for Amazon’s payment business

Amazon’s (AMZN) acquisition of Whole Foods (WFM) could undermine PayPal’s (PYPL) chances of winning Amazon’s payment processing business. Separating from eBay (EBAY) was supposed to make it easy for PayPal to process payments for eBay rivals. When PayPal was part of eBay, some retailers and merchants worried that dealing with it could expose their sensitive data to rivals. Considering how PayPal’s merchant customer base has grown since its separation, it’s evident that staying out of eBay’s shade has helped PayPal win over customers who previously avoided it.

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Long wait for significant Amazon-PayPal deal

However, Amazon has remained an elusive potential customer for PayPal. It emerged earlier this year that Amazon and PayPal were in talks to tap into each other’s platforms for mutual gains. PayPal CEO Dan Schulman even appeared to suggest that as the company consumer base grows, it would be difficult for marketplaces, such as Amazon, to ignore it. Despite talks, nothing concrete in the form of a deal between Amazon and PayPal has happened.

PayPal finished 1Q17 with 203.0 million registered user accounts, up from 184.0 million a year earlier. More than 190.0 million of those accounts are consumer accounts.

No hurry to love PayPal

With Amazon bringing Whole Foods under its wing, it could be less interested in hurrying a deal with PayPal. Whole Foods is bringing customers that Amazon could introduce to its Amazon Pay service. As long as the Amazon Pay user base continues to grow, Amazon can afford to delay integration with PayPal. Using an in-house payment processor not only helps Amazon keep a firm grip on its previous data tightly, but it also contributes to its top line. Meanwhile, PayPal is courting merchants as it tries to fend off competition from emerging rivals such as Square (SQ).


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