Cheatsheet: What to know about Amazon Pay

Amazon Pay, which has been around since 2007, made a leap into physical retail last week with the launch of Amazon Pay Places, which lets customers pay with Amazon at participating brick-and-mortar stores. It's a move that's caused speculation as to whether this is another nail in the coffin for physical retail stores. And by getting into payments at retail stores, Amazon is moving into a space that was once the exclusive domain of the banks. With a growing army of loyal customers, Amazon's encroachment into bank territory is seen by many as a threat to traditional financial services. Amazon Pay lets customers pay for items in a store as if they were on Amazon.com; the customer simply needs to click on the Amazon Pay button to log in to their Amazon account, without the friction of having to type in credit card information or scan a photo of it. Customers are entitled to the same protections that Amazon users would have if they paid for purchases on Amazon online. According to the company, the feature is accepted at thousands of online retailers including Guess, Nine West and Lenovo. As of July 2017, the service is available to merchants in the U.S., the U.K., Germany, India, France, Italy and Spain. Here's what you need to know. What's new:

• Amazon Pay Places is Amazon's first foray into payments at physical retail locations.
• For now, Amazon Pay Places lets customers use the feature at TGI Fridays locations in some cities. To pay, customers need to open the Amazon mobile app and select "Programs & Features" on the drop-down menu. Customers can preorder and pay beforehand, similar to the functionality available on mobile apps of companies like Starbucks and Panera.

The numbers:

• In 2016, more than 33 million customers in 170 countries used Amazon Pay to make a purchase.
• Payment volume nearly doubled in 2016, reaching peak volume on Nov. 28, when customers in the U.S. and the U.K. were offered Cyber Monday deals.
• Over half of Pay with Amazon customers are Amazon Prime members, who are known to spend more. (A report from Consumer Intelligence Research Partners found that Prime members spent $1,300 per year compared to $700 for non-Prime members.)
• Active merchants grew 120 percent between 2015 and 2016 as Amazon Payments expanded support for new areas, including government payments, travel, digital goods, insurance, entertainment, nonprofits and charities.
• The average Pay with Amazon purchase was $80 in 2016, and the largest single transaction that year was $40,000.
• A Forrester Research poll last year of retailers found that 58 percent were interested in Amazon Pay but had no plans to roll it out in the next 18 months. Another 38 percent said they were not interested in it at all. By contrast, 76 percent of retailers polled had either already added Apple Pay or were planning to do so.

Opportunities: Thad Peterson, senior analyst, Aite Group: "It could exceed the visibility of PayPal if Amazon can succeed in the physical world of retail. Amazon Prime has 80 million customers in the U.S. Think about the power of 80 million customers paying $100 a year for the privilege of buying with Amazon. There's an embedded loyal customer base; they understand the product and its convenience. It's an almost frictionless payment method -- a buy button that works the same way anywhere you go." David True, partner, PayGility Advisors: "What they’re going after are the smaller merchants who don’t feel they’ll be put out of business by Amazon. They've built in a preorder system [for restaurants], and for TGI Fridays, it makes it easier. I can see the sell for these kinds of restaurants. I wouldn't be surprised if they get accepted at some of larger fast-food chains." Challenges: Brendan Miller, senior analyst, Forrester Research: "If I was an independent merchant, I would not want to offer my customers Amazon Pay because at the point of checkout, you're reminding the customer that they could get the item they're buying more cheaply on Amazon. And to be disruptive, the experience would have to get much better. In order for more of these types of transactions to take place at a restaurant or retailer, there has to be integration with retailers' point-of-sale systems. There are restaurants using hundreds of different point-of-sale systems. Operationally, how do you scale that?" David True, partner, PayGility Advisors: "Bigger merchants may think about how much it costs them -- they may say 2.9 percent plus 30 cents per transaction is not a very good price." Thad Peterson, senior analyst, Aite Group: "The overwhelming advantage that the Chases and Wells Fargos have is their massive plastic portfolios. The vast majority of customers still use plastic -- the challenge for Amazon and PayPal is to penetrate that at a scale to grow the business."