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Amazon's new payment card reader viciously undercuts Square and PayPal

Amazon's new payment card reader viciously undercuts Square and PayPal
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If you own an iPad, all you need for your business to accept all major credit cards is an app and a $40-$50 card reader attachment. Amazon just released a competitor to Square and PayPal, the industry's top dogs.

I've noticed that Amazon's latest strategy has been to round off all of its services into all-in-one packages. Their card reader is built around their "Amazon Local" system, a "pay $10, get $20" service like Groupon or LivingSocial.

Amazon Local Register doesn't just compete with Square, PayPal and every other card reader on the market - it undercuts them by a massive margin. Card readers make money by simply taking a per-designated percentage out of every purchase.

Square and PayPal's card reader take of 2.75 and 2.7% of every purchase, respectively. Amazon's introductory cut will be 1.75% until the start of 2016.

That "until the start of 2016" is what's important here, because it means that Amazon's cut will probably normalize or go up when 2016 comes around. Businesses, enticed by paying a full percent less than they would for other services, will already have Amazon's card reader and pay the extra percent rather than switch.

Amazon is basically paying for an "install base." An install base is a pool of people who own a product and would be willing to buy accessories or support promotions for something that fits with the product that they've already purchased.

Whether it works for the company or not, that does mean that you can run all of your credit card transactions for only 1.75% of the purchase until 2016.

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Source: Engadget
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