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Why Amazon, Google, and others want to serve as your currency

Amazon Coins

Amazon introduced Amazon Coins last week. Everyone with a Kindle Fire was offered 500 Amazon Coins which equaled $5.00. The coins can be used for apps and games. By using Amazon Coins, Kindle Tablet owners will save 10% automatically on apps and games because you receive a 10% discount when you purchase more coins. But Amazon Coins aren’t the first foray of Amazon into offering an internet currency. Amazon launched Amazon Payments,a Paypal alternative, in 2007 that never really took off. Amazon also has TextBuyIt that allows you to purchase items simply by sending a text message.

Google announced a week ago that you would be able to send and receive money using GMAIL. Google also has Google Wallet, a way to shop on the internet and pay without re-entering all your credit card information.

As the Verge article points out, XBox Live users must by Microsoft Points in order to buy things at the xBox Marketplace.

So how are Amazon Coins different? There really isn’t a difference. While one Amazon coin is equal to one penny, you cannot currently revert back an Amazon coin into real money. Take, for instance, Bitcoin. Bitcoin is an internet currency that is used to transact some business on the internet. It is supported by an open source software and the value of the Bitcoin is based on a daily exchange rate. In many ways, it is traded and speculated on like a commodity. It’s completely unregulated which is part of the appeal to the internet denizens.

Amazon Coins could stand outside of financial regulatory schemes, particularly if the Coins are used solely on Amazon for Amazon purchases.

From a financial standpoint, Amazon Coins reduces the amount of money Amazon pays for credit card fees, fees that are incurred with every transaction that is conducted on Amazon when a customer uses a credit or debit card. (Some of my local merchants will give a discount if you pay with cash these days). Bookstore and publisher, Siren, uses this feature. In order to buy a book under $5.00 at Siren, you actually have to buy “Siren Bucks”.

Amazon Coins are like a gift card balance. You don’t really feel like you are spending money when you purchase something because you already have a balance on your account.

Most importantly, though, it ties a consumer deeper into the Amazon ecosystem. Analysts have estimated that the average Amazon Prime customer spends two times as much as a non Prime member, $1,224 a year compared to $505.

The point of Google Wallet or Amazon Coins or Facebook Credits is for that company to serve as the portal for every shopping transaction that you have on the Internet. Online only retailers grow 27% annually per one report.

I was told by my mentor that you make money when you stand in the place where money trades hands and that is exactly where Amazon, Google, and the like are trying to position themselves.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

8 Comments

  1. Avery Flynn
    May 19, 2013 @ 10:33:50

    I’m curious:
    1. Are there regulations concerning these types of financial arrangements?
    2. Is there any oversight?
    3. Can the Amazon coins, Google money, etc. be used internationally across platforms?

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  2. Maili
    May 19, 2013 @ 11:06:49

    My brother had worked for Beenz, which dealt in an online currency and a point system. I must admit I wasn’t interested enough to ask him how it all worked, but I had an impression that although successful in some respects, it was an ongoing struggle to get it truly established.

    The key problem is, users wanted to convert online money into real money somehow or lower a conversion percentage (£1 per twenty beenz/points, instead of £1 per five hundred beenz/points). So the progress was continuously sluggish. After just two years or so, it pretty much shut down. I suspect Amazon Coins will go down the same route like other failed ventures.

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  3. Wahoo Suze
    May 19, 2013 @ 12:27:20

    “…I owe my soul to the company store.”

    My family has probably collected $100K in Canadian Tire money over the years. I’m sure it’ll make good kindling one day, when CanTire decides it’s not doing that type of discount anymore.

    I find it fascinating that everyone on the planet is tired of the usurious practices of the banking industry (transaction fees, deposit fees, withdrawal fees, sunshine fees, snow fees, fee fees–yeah I’m making them up, but so do the banks), but so few people seem to have the political will to address them. And now private, for-profit companies are trying to create the de-facto currency of the internet. I don’t think I’m precisely worried about that (private, for-profit companies haven’t been able to land on a single e-book format, so why would they agree on a currency?), it just strikes me as something that should get more attention than it is.

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  4. Moriah Jovan
    May 19, 2013 @ 13:13:37

    @Wahoo Suze:

    few people seem to have the political will to address them

    No, not enough people in enough numbers have the political power to address them. Thus it’s left to the black market and workaround solutions that are shut down as fast as it can be.

    Bitcoin is the future of internet commerce. How do we know this? Because the Department of Homeland Security found it threatening enough to shut down the biggest Bitcoin exchange. There is absolutely no power the American people can muster that will kill the Federal Reserve without a full-on revolution.

    I doubt Amazon will face the kind of regulation that Bitcoin has because it’s basically a gift card system. It’s like tokens in the arcade. Bitcoin, on the other hand, is a decentralized currency that, if widely adopted, will crush the dollar. The central banks (none of them) want that.

    I have faith, though. The black market will out.

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  5. Carrie G
    May 19, 2013 @ 13:53:34

    I have a Kindle Fire and I wasn’t offered any coins. I’d never heard of them until reading this, I went over to amazon and can’t find much about them. I did finally see how to buy the coins, but nothing about how you access them in your account. I guess I’m not interested enough to read all the forums to get up to speed. Maybe when they allow “coins” for ebook purchases I will be interested.

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  6. Anne
    May 19, 2013 @ 15:13:10

    @Carrie G:

    On the 2nd gen Fire- I can see my coins if I go to Apps> Store. They show in the lower right hand corner.

    I do think Amazon’s credit card fees factored into their decision to offer this product/service and maybe it will appeal to big app buyers. For me, I’ll continue to purchase a gift card each month in the amount I have budgeted for Amazon digital content and email it to myself. I guess that still saves Amazon on the fees but it also helps make sure I don’t exceed my budget and more importantly to me, I only have to enter one credit card transaction to my financial software.

    Ok, I just spent some of my gift coins on an app. After sales tax, I don’t have enough coins to purchase the second app I looked at. I will not be buying 500 coins when I only need 39. If I really want an app, I’d prefer to just use my gift card. That system works for me and I’m not limited to using it just for apps.

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  7. Christine
    May 19, 2013 @ 17:02:40

    Amazon coins seem to be the same thing as Disney Dollars. Disney figured out long ago that if they could get people to buy their Mickey money (usable only at the Disney parks and stores) they were already ahead of the game. Some money would be forgotten about and never spent, and the rest wouldn’t feel like “real” money when it was spent.

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  8. Vivian Arend
    May 19, 2013 @ 21:05:44

    @Wahoo Suze:

    Fun memory your comment triggered: My hubby and I (newly married with a budget so tight it squeaked) collected all Canadian Tire money and bottle refund money to purchase a barbecue. Took 1 1/2 years of saving. You should have seen the cashier’s face when we handed over the wad of papers.

    ReplyReply

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