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Is Amazon Sending a Message to PayPal?

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Sep. 11 2018, Published 1:59 p.m. ET

PayPal has been eyeing an Amazon contract

PayPal (PYPL) believes it can work with Amazon (AMZN) to process payments for Amazon shoppers and sellers. PayPal’s CEO Dan Schulman at one point suggested that the company’s 250 million customers make it a valuable partner for any serious retailer.

But winning an Amazon payment contract has been elusive for PayPal so far. A recent Amazon move could make it even harder for PayPal to persuade the e-commerce giant to surrender part of its payment business to a third party.

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Amazon recruiting potential loan customers

Amazon is launching a new delivery program, which it has structured in a way that not only gives it delivery partners but also creates small businesses that could turn to it for payment services and loans. The program involves Amazon providing delivery vehicles to start-up couriers to help it ship packages to homes. It has ordered 20,000 vans for the program.

In addition to processing payments for shoppers and merchants, Amazon, PayPal, and Square (SQ) also run credit businesses through which they extend small loans to their customers. Square, for instance, has facilitated ~$3 billion in small business loans since 2014.

PayPal cutting ties with eBay

Since Amazon competes with PayPal in areas such as lending, it may not see much incentive to rush into a partnership if it feels it can get what it wants on its own. That could make it harder for PayPal to win an Amazon contract.

But PayPal is in the process of severing ties with eBay (EBAY), which could help it gain eBay competitors as customers or partners.

Amazon made $2.5 billion in profit for the second quarter compared to Alibaba’s (BABA) $1.3 billion profit in the same period.

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