The bane of brick-and-mortar stores now wants to partner with them. Amazon's new Local Register is a mobile payment service and credit card reader for smartphones and tablets. The target audience is smaller retailers, mom-and-pop shops, outside markets, and mobile vendors such as food trucks.
The reader costs $10 and is compatible with Apple devices running iOS 7.0 and higher, and Android 4.04 and higher. Company specs say Android use is optimized on Samsung Galaxy S3 and higher smartphones, and, unsurprisingly, Amazon's own Fire tablets; it is unclear exactly what is meant by optimized other than that it "may work" on other Android devices, but Amazon won't guarantee it will.
A free app sets up an Amazon Payments account to conduct credit card processing and track sales data. Deposits are automatically made on swiped transactions by 4 p.m. the next business day (but read the fine print).
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Amazon's Brand Power
As it has with tablets and smartphones, Amazon is counting on a combination of brand power and price undercutting to make headway against more-established market leaders including Square, PayPal Here and Intuit QuickBooks -- which are also sold through Amazon -- in an already crowded marketplace.
Amazon has a complicated relationship with small businesses. Many small businesses view Amazon as an enemy of in-store shopping, so although many small businesses already partner with Amazon Services to sell online, they may be wary of sharing all of their sales data.
Indeed, market observers such as The Motley Fool think Amazon is less interested in selling card reader processing services than gaining access to this data:
If it sees that one of its shoppers often swipes a credit card at a Mexican restaurant, for example, Amazon might start promoting Mexican food-related products like margarita glasses or a quesadilla maker. With 240 million credit cards on file, Amazon is bound to harvest some very useful data no matter who uses the product.
Amazon Price Undercutting
Amazon seems to value access to that data enough to keep its profit margins on Local Register low, or even take a loss. According to The Wall Street Journal, the main objective is to be a presence where so much of commerce is conducted today.
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Users who sign up before October 31, 2014, lock in a 1.75 percent swiped transaction rate that is good throughout 2015. Beginning in 2016, the rate become 2.5 percent, still lower than Square's 2.75 percent and PayPal Here's 2.7 percent. The manually keyed transaction rate, 2.75 percent, is .75 points lower than the fees of both of these competitors, even before their additional 15 cents fees.
There are no monthly fees, contracts, or fees for chargebacks, refunds, or international cards. As an additional incentive, Amazon is offering a $10 processing credit to offset the first $10 in processing fees.
According to Forbes, Square is estimated to have lost $100 million in 2013 and is seeking a suitor before tapping out its $340 million in venture capital reserves. Still, as pointed out by the New York Daily News, the mobile payments market is doubling in revenue every three to four years. Amazon has the resources and market reach to offer a better deal than its competitors and leverage the data it collects to further improve its core eCommerce business.