I don't think Checkout with Amazon has affected them at all. Checkout was closed to new signups since May 20th (from the article), and Wallet has been the digital-goods alternative for longer than that.
My guess would be that operating a physical goods processing company is a huge drain on the resource Google hates providing most: customer service.
Payment disputes are a pain, especially for physical goods. Some level of mediation is required when someone has purchased a physical good but has a dispute. But with digital goods you can just tell the seller to eat it (digital good, no actual cost loss)
Google never had great customer service for this product. There were less than five people (customers often called this out since they would submit multiple help tickets and the same people would respond) and they never wanted to devote money to better customer service since the product wasn't maintained. Thus companies didn't want to adopt a below par product with bad customer service compounding the problem.
http://www.chromium.org/developers/using-requestautocomplete