I mean, Paypal is all very well for a small site where customers don't trust you with their card details or you're not doing enough volume to get a decent merchant account - but neither of those applies to Amazon.
Paypal will want a bigger cut than Amazon's existing credit card processors. So why would Amazon want to use Paypal?
There is also limited liability with prepaid CCs, no matter what happens you can't be out more than the value of the CC, but you can get into considerable financial trouble with paypal WRT overdrafts and overdraft fees and bounced check fees ... its just not worth it unless you're well disciplined.
https://www.bankofamerica.com/privacy/accounts-cards/shopsaf...
Once Paypal and EBay are separate entities, Amazon now can reasonably enter into a merchant agreement with Paypal.
I don't buy into the Amazon/Paypal being competitors - while in theory this is true, Amazon has far more to gain by accepting paypal customers, than it has to lose by not winning the online payment business.
Hopefully, the industry will shift as more options become available and user-friendly. PayPal has the advantage of name recognition, but Amazon shares the same, and frankly, I personally regard Amazon more positively than PayPal. Hopefully, the industry continues its trend, now a quasi-oligopoly and eventually monopolistic competition.
Like others have mentioned, I too wonder how they are going to divvy shares.