Amazon.com has announced the beta release of the Flexible Payment Service, an addition to the range of web services which already includes on-demand computing (Elastic Compute Cloud) and Simple Storage (Amazon S3).

At first glance, this looks like big news for the Internet. It bears all the Amazon hallmarks: low price, developer-friendly, and easy to adopt. Here’s the pricing:

For Transactions >= $10:

• 1.5% + $0.01 for Amazon Payments balance transfers
• 2.0% + $0.05 for bank account debits
• 2.9% + $0.30 for credit card

For Transactions < $10:

• 1.5% + $0.01 for Amazon Payments balance transfers
• 2.0% + $0.05 for bank account debits
• 5.0% + $0.05 for credit card

For Amazon Payments balance transfers < $0.05:

• 20% of the transaction amount, with a minimum fee of $0.0025

There is no up-front fee. All these prices are reasonable, but the last one deserves particular scrutiny. If both buyer and seller have an Amazon Payments account, then you can receive a tiny payment at a realistic cost. You could even pay me a single cent, three-quarters of which I would get to keep.

Now look at PayPal’s fees. $0.30 fee plus a percentage for any transaction. Google Checkout? Complex, because Google wants to hook you into its AdWords advertising by giving free transactions up to a proportion of your AdWords spend, and because it is subsidizing the service to buy market share from PayPal. But the fees include $0.20 per transaction plus a percentage, which means you cannot do micropayments.

Amazon FPS is based on web services, so that developers can easily build it into their web applications.

FPS is interesting to me as a writer. It means I could self-publish and change a small amount per article – maybe just a few pennies. It is also interesting as a means of monetizing web services. A neat feature is that buyers can limit their risk by specifying both transaction limits and the total amount transferred over a period, for a particular recipient.

If Amazon FPS takes off, then Amazon becomes a major identify provider (because you will use your Amazon ID for payments to third-party sites) as well as becoming an Internet bank.

I think Amazon is a sufficiently well-trusted name that this could work. I should add, though, that nobody is sure of the significance of micropayments – we’ve just speculated that they might be a key enabler of (ugh) Business 2.0. See Wikipedia for a discussion and links. So far, it has been advertising rather than micropayments that has changed the game. But that was before Amazon FPS. What do you think?

PS – see Jeff Barr’s post for more information and early adopter examples.