Online retail behemoth Amazon will soon offer borderless card payment facilities enabling your business to accept customer payments by card regardless of where you might be located.
The new product, Amazon Local Register, is a black, compact rectangular card reader stamped with Amazon’s logo across the front. The $US10 device plugs into a merchant’s smartphone or tablet, and works in conjunction with a smartphone app to process and track all of a merchant’s business transactions.
It also comes with an enticing offer: lower processing fees.
The device is a new stomping ground for the Seattle-based web company, which has expanded its online storefront over the years to include goods of nearly all sorts – books, furniture and electronics, to name a few. While many of the products on Amazon.com are sold directly by Amazon, the site also lists products sold and shipped by smaller retailers.
And that, some analysts say, is why this move was not entirely unexpected.
“So much of this is about Amazon building platform lock-in,” said Heath Terry, an internet analyst with Goldman Sachs, who said the Local Register card reader was just one more component filling out an entire suite of offerings for the small businesses that sell goods on Amazon.com.
“If you’re a third-party seller on Amazon’s site that’s using them for one thing, ultimately you’re using Amazon for everything,” Terry said.
This should all sound familiar. Square, the San Francisco payments startup valued at $US5 billion ($5.37 billion), has offered its sleek version of a mobile card reader since 2010.
PayPal, eBay’s payments division, which processed $US55 billion in transactions last quarter, offers a similar device.
And then there are the huge incumbents like Verifone, which has sold its own terminals to merchants of all sizes for decades.
So by most measures, Amazon is late to the game. And yet no company with a mobile card reader has emerged as a clear winner. Amazon could push its way into the market with its own set of attractive incentives for small businesses.
For instance, Amazon is offering early adopters an especially low processing fee on each credit card swipe processed. If a merchant signs up before the end of October, each swipe will cost 1.75 per cent of the total transaction, a deal which will last until the end of 2015.
That is a full percentage point below Square’s cut and less than PayPal’s 2.7 per cent charge as well. Even after the promotional deal expires, Amazon will charge merchants 2.5 per cent.
This is classic Amazon. With its low rate, the company is most likely losing money on transactions it processes, according to Colin Sebastian, an analyst with Baird Equity Research.
“In typical Amazon fashion, they’re using price as a motivator,” Sebastian said. “It’s pretty obvious in this case that they’re losing money on the swipes at least.”
That is similar to the company’s strategy with Kindle Fire tablets and smartphones; while Amazon makes little to no money on selling the Fire devices, each one acts as a portal to Amazon’s retail universe, where customers are encouraged to spend more money buying goods online.
But a better rate does not necessarily guarantee success. As competition has increased, payments companies have expanded the scope of their services, aiming to attract merchants with more than just a lower transaction cut on credit card swipes.
Both Square and PayPal, for instance, offer lending programs for merchants looking to expand their operations.
This week, Square started an appointment scheduling service for businesses. It has also acquired Caviar, a startup that provides food delivery service to small restaurants that do not otherwise offer it.
Some businesses may be reticent to sign up for Amazon’s new reader, lest they hand over scores of information to the online retailer. Packaged with its new card reader, Amazon’s Local Register software will manage detailed data on a merchant’s overall business operations, including sales trends and volume. That is the kind of data set that could help Amazon operate more successfully in the long run.
Every business needs a card payment facility, in particular online and Offshore incorporated businesses.
Whether you’re a fan of Amazon or not more competition in the often hard to access (and expensive) world of merchant account service providers can only be a good thing.