When you consider Amazon’s announcement of its entry into the mobile payments market in August, there is little wonder it has caused quite such a stir (not least in camp Square), due to its highly competitive introductory rate as well as its huge potential, writes Anna Milne
f you stacked every Christmas Story leg lamp (google it) purchased by Amazon customers during Christmas 2012, the height would reach the top of Mt. Everest. So goes the Amazon line on Christmas. On the payments jobs website it states that on Cyber Monday 2012, Amazon customers ordered more than 26.5m items worldwide, or 306 items per second.
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The device is designed for small businesses and merchants to use as an alternative to cash in the ever expanding mPOS market. Merchants will be charged lower merchant fees than competitors Square and PayPal here, at 1.75% per swipe (NB EMV chip is not available) until January 2016, as long as they have registered by 31 October. From that point onwards the fee will be 2.5% per swipe and 2.75% for keyed transactions. Square charges 2.75% per swipe; PayPal Here 2.7% and both charge 3.5% plus 15 cents per keyed transaction.
So even once the introductory rate has lapsed, Amazon Local Register’s fees will undercut those of its competitors. Amazon will sell its own branded mobile payments dongle at Staples and it will be the 123rd mPOS brand to enter the market. What’s more, consumers won’t need a card to interact with mPOS merchants at Amazon.
When merchants sign up, they pay $10 but at the same time receive a $10 credit to their Amazon Payments account – a system originally created for third-party merchants to receive payments for goods sold via the firm’s various websites.
Amazon Local Register’s reader is compatible with Android, iOS and Amazon’s Fire devices, although not the Fire phone, and is offering a business bundle for the reader and its Kindle Fire HDX 8.9. With this bundle, merchants get use of the so-called Mayday button, giving them 24 hour technical support.
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By GlobalDataThis year Amazon has made forays into set-top boxes, music streaming and smartphones, albeit tentatively, so mobile payments were perhaps the inevitable next step.
However, what sets Amazon apart from its immediate competitors is its background operation of, oh, just about the largest internet retail business going.
"Whenever a customer buys something from Amazon or logs in without buying something, Amazon is collecting all kinds of information about that person. There’s a lot of data that can be mined about how they peruse the website, what they put in the cart, what they abandon and how the customer actually goes about searching for a product," said analyst Greg Girard, back in 2012. Two years on, it’s all about omni-channel retailing and this latest launch from Amazon is just providing an extra channel so as to reach out to more retail merchants and customers.
A question of trust?
It has been said that Amazon is seeking to leverage the consumer trust it has to offer what is effectively a cash register to the small business market. And there is no doubt it is playing on its strong customer service history in launching the card reader. Customer service has been something of a bum note for Square.
With Local Register, business owners can also run reports on sales trends, enabling merchants to identify products that are performing well. This is a key feature that is slightly more comprehensive than Square’s recently launched Square Analytics.
Merchants can choose from: How is my business doing? What are my sales? Are my transactions growing? What’s my bottom line? What time of day am I busy? or What’s selling? It also hints at possible future plans for Amazon in terms of brick and mortar retail business services.
At present, Amazon Local Register is only available to US merchants so when you consider that more than one billion units worldwide were ordered from Marketplace sellers on Amazon in 2013, there is a very large potential brick and mortar audience to tap into.
It’s just a curious thing, why Amazon launched this for mag stripe only, when EMV-compliance is just around the corner in the US, to say nothing of European EMV adoption. But that’s for them to know. At least Square has recently started to integrate EMV chip card readers. As of October 2015, merchants and acquirers will bear the financial costs incurred from fraudulent use of counterfeit, lost and stolen cards. Perhaps this is a price Amazon is willing to pay.
The mPOS launch is more an extra way to bring extra customers into the Amazon fold than an independent product launch- one might even say a marketing drive. Once onboard with mPOS, merchants can purchase all manner of accessories, from cash drawers to receipt printers, and shoppers can use Login and Pay to pay with their Amazon accounts on merchant websites. mPOS may just be a gateway to augment Amazon’s online dominance and pave way for physical retail dominance.
That’s if comments such as Amazon Local Reader being only "the core" of the system and "What AWS (Amazon Web Services) is for developers, this more detailed application layer above AWS will be for businesses," uttered earlier by so-called Amazon insiders earlier in the year are to be taken seriously.
And yet it is quite likely. After all, only so much money can be made from mPOS alone, something Square knows all too much about. After five years, it is yet to make a profit. A range of business software including accounting and inventory tools and even website building services seems like a natural progression for the giant.
The day after Amazon launched its card reader Square posted a blog detailing the ‘top ten myths about Square’. Good on Square for confronting naysayers, even if it is floundering but so much protestation does lead one to believe the doubters. It’s not over yet though for Square, it still wins hands down in the style stakes. And Mr Dorsey does have innovation on his side.
