Square POS system Amazon
Amazon recently declared war on the mobile payments industry with Amazon Local Register, a card reader similar to dongles offered by Square and eBay's PayPal.
What makes Amazon Local Register such a threat is that it undercuts all of its competitors. Amazon is offering a promotional rate of 1.75% per card swipe on credit and debit cards until Jan. 1, 2016. After that, the rate will rise to 2.5% per swipe, which is still cheaper than any competitor - Square charges 2.75% per swipe, PayPal charges 2.7%, and Google Wallet charges 2.9% per transaction. Amazon is also basically giving away the card reader for free, since its $10 price tag is erased by $10 in transaction credit.
Amazon Local Register. Source: Amazon.
Let's take a closer look at Local Register to better understand what Amazon plans to gain from this aggressive new strategy.
The business of mobile payments
Amazon's plan is squarely aimed at small brick-and-mortar businesses, the same market that Square, PayPal, and Google have pursued.
The theory is simple - the clunky old point-of-sale, or POS, systems will eventually die out in an era of smartphones and tablets. Research firm IHL Group forecasts that mobile POS devices will replace 12.4% of traditional POS systems in North America by 2016. According to TechNavio, the global markets for POS system software and hardware will respectively be worth $3.2 billion and $31.5 billion by the end of 2014.
PayPal offers three products to replace POS systems - a $15 card-reading dongle, a Bluetooth device known as Beacon that allows customers to check in and pay at stores hands-free, and a stand-alone mobile chip and card reader that costs around $120.
Square's business is heavily centered on mobile devices. It offers Reader, its card-swiping dongle for iOS and Android, for free. Its full POS system, Stand, costs $99 and converts iPads into sleek checkout registers. Register, an app for iOS and Android devices, can accept manually entered credit card payments. Square also offers Market, which is like a reverse version of Amazon - customers who use Square's POS systems can also advertise their wares online through the site.
