Amazon Introduces Local Register to Mobile Payment Market

by Matt Klassen on August 19, 2014

It’s difficult to plot the future course of the mobile payment market, as the initial vision of our smartphones replacing our credit cards and cash seems to have fallen by the wayside, replaced by a new mobile payment reality that has ostensibly transformed smartphones into digital cash registers instead of digital wallets. That means that while the smartphone isn’t threatening to replace credit cards anytime soon, it has been employed as a credit card reader, making the task of taking credit card payments exponentially easier.

Ignoring the question of whether this current mobile payment landscape is simply an evolutionary step along the road or a completely new direction for this fledgling market, companies like Square and PayPal have already established themselves in this sector. But try as they might to establish a foothold in a market they both ostensibly created, their security looks to be short-lived as e-commerce heavyweight Amazon is bringing its full weight to bear on the mobile payment industry, unveiling Amazon Local Register.

Like the current market offerings, Amazon’s Local Register combines a secure card reader smartphone extension ($10) with a free mobile app, offering vendors a simple and affordable way to take payments. But as normal as that sounds, Amazon is poised to shake-up the entire mobile payment market by doing what the e-commerce giant does best…radically undercutting its competition.

While Amazon Local Register may seem like any other mobile payment service currently available, if there’s one thing Amazon’s size and retail dominance allow it to do is take a financial hit up front, while it establishes a profit customer base that will achieve long term profitability.

To that end, Amazon is offering its mobile payment service at an introductory rate of 1.75 percent per swipe until January 1st, 2016, a full percent lower than Square or PayPal Here. While that one percent may not seem like much, I guarantee that it will be a tipping point for many small businesses, particularly those with razor thin profit margins.

“In the short run, the lower transaction costs will be good for small businesses too,” Vlad Zachary, director of omni-channel commerce for Upshot Commerce, told the E-Commerce Times. “Sellers who avoided mobile payments due to lack of trust might reconsider, and merchants with relatively high transaction volume will definitely consider switching to Amazon Local Register, at least until 2016, when the lower transaction percentage is set to expire.”

Of course by the time Amazon’s promotional rate does expire the company will have exactly what it wants, a dedicated and entrenched user base who will likely find it easier to stay with Amazon then go looking for some other cheaper mobile payment service.

But Amazon’s strategy should really come as no surprise, as the e-commerce giant tends to know what its doing when delving into new markets.

“[Amazon] has dictated the tone in the e-commerce arena and enterprise computing,” Trip Chowdhry, managing director of equity research at Global Equities Research told the E-Commerce Times. “Mobile payment is the next sector that it will influence.”

But that said, Amazon’s strategy certainly comes at a cost, as this spend now, earn later approach has left many investors wondering when exactly “later” will get here, with the company posting substantial losses this quarter and promises of more of the same to come. Of course that is cold comfort to Square and PayPal, who will likely see their mobile payment market share quickly dwindle as customers embrace Amazon’s new Local Register.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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