Amazon Could Be Working On A Square Competitor
Rumors have been coming in that Amazon is readying a mobile payments product that could compete with Square, Intuit GoPayment and PayPal Here. A tipster and an industry source both tell us that Amazon is going after smaller chains of retailers …
Context & Ripple Effects
The dongle-attached card reader has become the most contested patch of fintech real estate of 2012. PayPal moved first this spring, turning months of sourcing into a shipped product with PayPal Here, while Square entered the fall armed with a fresh Apple retail distribution win and, just ten days before this report, a $200 million round at a $3.25 billion valuation.
Now TechCrunch's tipster and an industry source say Amazon is preparing its own reader aimed at smaller retail chains — an unconfirmed report, but one picked up same-day by CNET, The Next Web, PandoDaily and others, which tells you how seriously the market takes even a rumor from Seattle. Coming days after the Kindle Fire HD launch, it fits Amazon's pattern of using cheap hardware as a wedge into new transaction businesses.
First-order effects
- Square, Intuit GoPayment and PayPal Here each gain a prospective rival whose defining asset is not the reader but a consumer wallet already attached to tens of millions of buyers — pressure none of the current three can match on the demand side.
Second-order effects
- Smaller retail chains become the pricing battleground: if Amazon enters with subsidized or free hardware, Square and Intuit face margin compression on the small-merchant segment just as they scale their own sales efforts there.
Third-order effects
- If platform companies keep converting existing account bases into physical-world payment rails, independent readers like Square risk being squeezed between vertically integrated ecosystems — pushing the industry toward wallet-plus-hardware bundles rather than standalone dongles.
The trend: Mobile card acceptance is consolidating around large consumer platforms that can bundle payments with existing accounts, leaving standalone reader startups to compete on price and distribution.