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Amazon, after a long time rumor, has confirmed that they are developing their own in-house payment system dubbed the Amazon Flexible Payment System (AFPS).

So what advantage would Amazon have with building their own in-house payment system? Everything.

I say everything because they will end up with their own store system that would allow businesses to become fully dependent on Amazon. Yahoo! already does this in a sense through their Yahoo! Stores, but it doesn’t quite have the pizazz that Amazon does.

Let’s take a look at a few routes Amazon could go with this new Amazon FPS.

Option 1: Let developers hook in to the AWS API to grab store data or even just content, then build their own store completely with their own products. Then utilizing the FPS to process all payments, therefor giving Amazon another cut of the profits through the payment processing.

Option 2: Start competing with eBay’s PayPal or Google’s Checkout just as another payment processor, possibly with lower fees and/or costs to use.

Option 3: Become a new competitor to platforms such as 2Checkout or Authorize.net for already-existing online stores.

These are simply just a few possibilities that Amazon could do with their new payment system, but the real possibilities are endless. This is a strong and well thought out business for Amazon.