Today, Buxfer added funds-transfer capabilities to its online personal finance app (see announcement here, previous coverage here). The service is free through the end of August, but could eventually carry 1% to 2% fees to cover transaction costs.

Buxfer co-founder Shashank Pandit has been dangling this bit of news in front of me for the past two weeks. But he would only tell me that they were partnering with a big player to enable funds transfer (note to Amazon attorneys, he did NOT violate the NDA). I figured it would be Chase, Wells Fargo, or perhaps PayPal. Even with the rumors this week of Amazon's new payment services, I hadn't put 2 and 2 together.  

This morning it all makes sense. Amazon.com announced a potentially disruptive payment service, aptly called Flexible Payment System (FPS). And it's announced, in what else, a lengthy blog post at the Amazon Web Services blog (see note 1). The FPS website is here. The company even built an FPS Sandbox where users (see screenshot below), both individuals and companies, can play with the service without moving actual money around.

Buxfer is using Amazon Payments to allow users to settle their debts electronically, a vital piece of a social personal finance app. Online personal finance without payment capabilities is like the Internet without email. Even if the company ends up charging a small fee, the convenience would be worth it for many users. 

Implications
The Amazon service potentially makes it easier for smaller Web-based companies to take on traditional financial institutions. It won't alter the payments landscape overnight, like PayPal did in 2000, but it could usher in a rash of new entrants competing with banks and credit unions for the high-end personal finance customer (note 2). But the big stumbling block: consumer trust still favors incumbent financial institutions. In any event, the game just became more interesting. For more information, see Online Banking Report: Social Personal Finance.  

Buxfer homepage noting Amazon Payments

My default account page at Amazon's payments sandbox (I have not made any transactions, so the ledger is empty)

Note:

1. The post is signed by Jeff, which is Amazon evangelist Jeff Barr, not the slightly more famous other Jeff (Bezos). 

2. Another company using Amazon Payments is FreshBooks, a small-business billing service.