Amazon payment service targets micro-payments

Amazon has quietly rolled out a limited beta of its Amazon Flexible Payment (AFP) service.

The service offers payment outsourcing to third party websites and applications. It joins Google Checkout and Paypal in the payment outsourcing market.

Similar to its competitors, Amazon offers developers a set of application programming interfaces (APIs) that allows them to connect to the payment service. Shoppers can pay with credit or debit cards.

Buyers with an existing Amazon account are able to check out with their existing Amazon log-in and password credentials, saving them the effort of entering their shipping and billing information.

Amazon claims that its service offers developers more flexibility than its competitors. For instance, the firm offers a special GateKeeper service that allows developers to set limits for the maximum amount of funds that each sender and receiver can transfer. The feature might appeal to businesses guarding budgets and help limit fraud.

AFP also talked up its ability to tally micro-payments more cost effectively. The service will accept payments as low as $0.01 and bundle several payments into a single transaction to cut back on transaction fees. The service is expected to enable a new class of online businesses such as media download stores.

Amazon for instance charges one quarter of a cent ($0.0025) for a $0.01 transfer. The same transaction on Google would cost $0.20 and $0.30 at Paypal.

Contrary to its competitors, Amazon charges different fees based on the payment service used. A credit card transaction is charged a higher fee than a debit card transaction, and an Amazon Payments balance transfer triggers the least amount of fees.

A $20 credit card transaction carries a $.88 fee on Amazon, $0.60 with Google and $0.88 at Paypal.

Both Amazon and Paypal offer volume discounts to stores meeting monthly sales targets. Google has waived all fees during the 2008 calendar year and is offering free transactions to stores that meet minimum spending requirements of Google adwords.