Amazon introduces its $10 mobile card reader, Local Register, and undercuts Square and PayPal transaction fees
Amazon undercuts Square and PayPal with its own mobile card reader — Square's grand plan to democratize credit card payments has inspired a clutch of imitators, the latest of which is Amazon.
Context & Ripple Effects
Amazon's entry had been anticipated since reports of a Square rival in 2012, with a July 2014 report pointing to an August rollout. It arrives in a market already shaped by PayPal Here and Bank of America's own mobile-payments offering, rather than as a standalone experiment.
The important change is Amazon pairing low-cost hardware with lower processing fees, making merchant-acquisition economics the immediate competitive front. Square, meanwhile, has been pursuing revenue beyond payment processing through tools such as appointments for small businesses.
First-order effects
- Small merchants gain a $10 Amazon reader and a lower-fee processing alternative to Square and PayPal, reducing the cost of switching or adding a second acceptance option.
- Square and PayPal face direct pressure to defend merchant pricing and retention as Amazon turns its existing merchant relationships toward in-person payments.
Second-order effects
- Square's push into booking and other small-business software becomes more consequential: bundled tools can help distinguish its offering when card-processing fees are compressed.
- Mobile-reader competitors, including PayPal and Bank of America, must compete on merchant services and distribution as well as reader price and transaction rates.
Third-order effects
- If low-fee entrants keep using payments to acquire merchants, the mobile point-of-sale market shifts toward payments as a gateway to broader small-business software and financial services rather than a standalone margin pool.
The trend: Mobile payments is becoming a contest for small-business relationships, with inexpensive hardware and lower take rates used to open the door to wider merchant services.