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Amazon takes aim at Square with low-fee mobile card processing service

In exchange for being allowed to use a free mobile application and card reader to quickly process payments from a phone or tablet, users of the Amazon system who sign up by Oct. 31 can get a transaction fee through Jan. 1, 2016 that will be one percentage point less than Square’s 2.75 percent per-swipe fee. Amazon’s rate will rise to 2.5 percent after that.

“We believe it is still day-one for mobile point-of-sale solutions,” said Julie Law, a spokesperson for Seattle-based Amazon. “According to the US Census Bureau, there are 26 million small businesses in the US. Most of those companies do not have a mobile point-of-sale solution.

“Amazon is both an established innovator in mobile shopping and we have a strong mobile payments offering for online companies through Login and Pay with Amazon,” she said. “We are also a trusted mobile device maker and most importantly, we work to offer the best possible services at the lowest prices, backed by Amazon customer service.

“Amazon Local Register builds on those successes and the tradition of simplifying complex things that often get in the way of serving customers.”

Competitive threat?

The move raises questions about how many retailers would sign up for Amazon’s processing service as it is perceived by many as a competitive threat.

Amazon Local Register YouTube video.

On top of the changes the redrawing of the retail market has brought, traditional bricks-and-mortar retailers are at a disadvantage against Amazon, given its ability to gather data on customers’ shopping habits. Amazon’s unveiling of its Fire phone was seen as an effort to gain access to even more valuable marketing data as well as to keep core customers engaged.

“Amazon has a long history of working with entrepreneurs and businesses of all sizes to develop and grow their business and place customer trust at the forefront of those relationships,” Ms. Law said. “In fact, the Amazon Marketplace consists of more than 2 million businesses which account for more than 40 percent of the unit sales on Amazon.

“Many independent business owners buy supplies needed to run their business on Amazon every day, as well as use seller services like Amazon Web Services, Amazon Payments and Fulfillment by Amazon,” she said. “Today, Amazon Local Register continues this tradition.

“We have actually heard from some business owners that the only thing that would make them change their POS system is cost saving. We always work to offer the lowest prices for the best possible services.”

Customers can get Amazon’s service by opening an account and buying the $10 card reader at, and downloading the free mobile application from Amazon Appstore, Apple App Store or Google Play. The card reader and app are compatible with Apple devices running iOS7, Kindle Fire tablets and some Android smartphones.

The service includes in-app reporting which enables a business to quickly check performance, sales trends, peak sales times and more from a smartphone or tablet.

The mobile payments field has become significantly more competitive, as merchants increasingly see the importance of integrating loyalty programs and rewards into mobile payments.

Mobile payments have gained traction with small and midsized retailers, with 40 percent of these businesses accepting payments at the point-of-sale via a mobile credit card reader attached to a smartphone or tablet, according to a report last year from BIA/Kelsey.

Square, launched in 2009 by Twitter co-creator Jack Dorsey and Jim McKelvey, aims to differentiate itself from traditional processors by offering lower, more streamlined, mobile-enabled processing fees. PayPalHere was a late-comer to the category, launching after Square had already gained significant acceptance with retailers.

Both companies have worked hard to gain a competitive edge by expanding their credit card reader solutions to include more services for targeted merchants.

Laying groundwork

For some time, Amazon had steered clear of enabling mobile payments, instead focusing on enabling consumers to store and redeem gift cards, a service seen as more in demand. But those endeavors were seen as laying the groundwork for a broader mobile payments strategy once the market was more developed.

Analysts said it was only a matter of time before Amazon brought out its own payment service where consumers could store cards, make payments and have cash debited.

“Amazon is a bit late getting into an already crowded market,” said Drew Sievers, former CEO at mFoundry and now founding partner at fintech investor Operative Capital. “The promotional processing price is attractive for a small merchant, but no matter how you slice it, Amazon is a competitor to every merchant it services.

“PayPal and Square are focused on payments, not being a retailer,” he said. “While PayPal and Square may charge a higher price, ultimately the merchant can rest assured that neither company will compete directly against his/her business.

“Of course there will be some merchants who will sign up for the new Amazon service,” Mr. Sievers said. “But it would be surprising to see mass adoption from merchants given the inherent competitiveness from Amazon.”

 Final Take

Michael Barris is staff reporter with Mobile Marketer, New York.