The Little API Feature Amazon Wishes it Never Kickstarted

Amazon has cemented itself as a top tier option for charging users thanks to its Amazon Flexible Payments Service API. The crowd-funding site Kickstarter has run hundreds of millions through the API, so it should also get some credit. Although, at Amazon, Kickstarter may get blame instead, having inspired many other sites, which eventually caused Amazon to turn away sites with similar concepts.

The most recent is Unglue.it, which raises funds to buy eBook rights to books that exist only in printed form. The company wrote a blog post after Amazon suspended its account:

Amazon Payments has informed us that they will no longer process pledge payments for Unglue.it, forcing us to suspend all active ungluing campaigns. According to a Senior Account Manager at Amazon, Amazon has decided against “boarding fresh crowdfunding accounts at this time”. Amazon has been providing payment services for Unglue.it, as it does for the popular crowdfunding site Kickstarter.

You might be thinking this shouldn't be a big deal. As far as accepting payments, it's a land of plenty with over 200 payment APIs. However, there's a specific way that Kickstarter and other crowd-funding efforts work. You pledge the money, which is authorized via Amazon. If the project fails to raise money, you are never charged. If the project succeeds, Kickstarter pushes the charge through Amazon using the previous authorization, even though it may have been months before.

Pre-authorization is one of the features that allows Amazon to truthfully call its offering flexible. There's also a good reason other providers don't do it. There's currently $18 million in pledges sitting on Amazon on behalf of Kickstarter alone. That's a lot of fake money. And there may be fraud or regulations issues, as the Hacker News thread notes.

Amazon can't very well suspend Kickstarter without a major PR nightmare, but it may wish it could. So, the next best thing is to remove the option for others. The burgeoning Everything Funded project that aims to be a non-curated Kickstarter received a similar response from Amazon. It chose to use the WePay API.

Kickstarter itself claims that Amazon is its only option. "Amazon... enables our all-or-nothing funding method," says the backer FAQ. "No other credit card processor currently supports our requirements."

Unglue.it apparently originally chose PayPal, but could not "convince Paypal that we were a legitimate operation."

When Amazon Payments launched in 2007, we wrote that one of the upsides was that it allowed for commercial use without requiring any special agreements. That's yet another way it's flexible, but it seems the company wishes it could take back that one little feature.

Be sure to read the next Financial article: TradeKing Encourages Innovative Entrepreneurs with API Competition