PayPal’s Honey Acquisition Exposes Tensions with Amazon

It’s becoming increasingly clear that PayPal (NASDAQ:PYPL) and Amazon (NASDAQ:AMZN) have competing business interests. As a result, the idea of the two companies working together might just be a dream. The latest friction between PayPal and Amazon is focused on Honey—an online shopping tool that PayPal purchased recently.

Honey helps consumers save money on their online shopping by taking advantage of discounts. Operating as a browser extension, Honey connects to a retailer’s site and track prices to find discount codes that shoppers can leverage to save on their purchases. Honey works with 30,000 retailers. So far, the company has drawn over 17 million users.

Amazon is one of the online retailers that Honey had been working with for years. Last month, shortly after PayPal announced that it purchased Honey, Amazon started flagging Honey as a “security risk.” During the December shopping rush, Amazon urged its customers to uninstall the extension to protect their privacy and data, according to a Wired report. Amazon has its own discount-hunting browser tool called “Amazon Assistant,” which competes with PayPal’s Honey.

Amazon labeling Honey as a “security risk” highlights the tensions between the company and PayPal. Notably, PayPal has wanted to process payments for Amazon merchants and shoppers, but Amazon hasn’t agreed.

While Amazon has locked PayPal out of its platform, it has been busy expanding its own payment service, Amazon Pay. As a result, Amazon has encroached on PayPal’s turf. Amazon Pay, which offers many payment services similar to PayPal, has gone big in India—a key PayPal market.

Overall, Amazon has attacked PayPal’s world and won’t give the company a place on its marketplace. As a result, PayPal has shifted away from Amazon. The company offers several services similar to Amazon’s offerings. Like Amazon, PayPal also makes loans to small businesses. Recently, PayPal donated one of its top executives to Google (NASDAQ:GOOGL)—a bitter Amazon rival. This week, Google struck a deal to acquire Pointy—a startup that helps merchants sell their products online without going through Amazon.

PayPal counts on Honey to help it become indispensable for merchants. Notably, Honey will help increase sales for PayPal’s merchant customers. Some 24 million merchants and 275 million consumers use PayPal services, including consumers on its Venmo platform.

PayPal stock has gained 6.18% YTD (year-to-date) through January 15. Meanwhile, Amazon stock has risen 0.77% YTD. The stock of Google parent Alphabet has risen 7.45% YTD.