August 13, 2014, 12:04 PM

Amazon leaps into mobile payments

Amazon goes after mobile point-of-sale payment systems from Square and eBay’s PayPal. As it has in the past, Amazon is undercutting rivals on price as it seeks to gain a foothold in the mobile payments arena.

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It’s one small step for mobile payments, and one giant leap into the mobile payments game for Amazon.com Inc. The online retail giant today announced Amazon Local Register, a point-of-sale payment system that works with tablets and smartphones.

The system goes after similar systems by payment processor Square and eBay.com Inc.’s PayPal. The rate businesses have to pay to Amazon to use its service is 2.5% of the purchase amount—Square and PayPal's rates are both 2.7%. And Amazon is offering a promotional rate for businesses that sign up before Oct. 31, 2014: 1.75% of the transaction value for purchases completed before Jan. 1, 2016.

“We understand that every penny and every minute counts, so we want to make accepting payments so easy and inexpensive that it no longer gets in the way of a business owner doing what they love—serving their customers and growing their business,” says Matt Swann, vice president of Amazon Local Commerce.

It’s nothing new for Amazon to use low prices to help it break into a new business. The e-retailer undercut competitors on prices for electronic books when it introduced the Kindle e-reader, aiming to drive sales by making e-books far cheaper than printed volumes. It’s also priced aggressively its Amazon Web Services cloud computing business, which Internet Retailer estimates now generates some $4 billion in annual revenue for the company.

Amazon is making it easy for businesses to jump on its payment bandwagon. In a new section on its site, Amazon is selling the card reader along with other hardware customers might need such as the Kindle Fire tablet, the Fire smartphone, receipt printers and cash register drawers.

To get started, customers must create an account on localregister.amazon.com, purchase a $10 card reader and download the free mobile app from the Amazon Appstore, the Apple App Store or Google Play. The card reader costs $10 and ships free. Amazon says it will credit the first $10 in processing fees, which essentially makes the reader free. Starting Aug. 19, customers can also purchase a card reader at Staples retail locations.

It’s been expected that Amazon would unveil a mobile payment system since the retailer bought mobile point-of-sale service provider GoPago late last year.

Reaction from consumers and possible customers seemed mixed this morning. Of the dozen or so reviews already on Amazon.com for the card reader, the average rating was just 1.5 stars. Reviewers cited the limited number of compatible devices and the need to create a new Amazon account as complaints about the just-released system.

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