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|The Amazon Local Register.
Photographed by Amazon.com.
Amazon stock(Nasdaq: AMZN) closed up 2.18% today (Wednesday) on the company's announcement it will launch a mobile credit card reader called Amazon Local Register. AMZN shares continued to make small gains after hours.
For $10, users can purchase Local Register and plug it into the headphone jack of a smartphone, tablet, or Kindle. Via the same network that processes Amazon.com purchases, Local Register will process these mobile credit or debit swipes. Amazon believes Local Register will prove the "easiest way for small businesses to get paid."
"Payments are hard and that's one of the things that gets in the way of serving customers, especially for small businesses," Amazon vice president of local commerce Matt Swann said. "Payment tools need to be inexpensive, simple, and trusted to get the job done."
The move represents a further step into physical brick-and-mortar retail by the world's largest online retailer. In December, Amazon announced a full launch of its consumer goods membership warehouse Pantry. Then in February, the company confirmed its acquisition of Double Helix Games, a new foray into gaming content. In April, it announced its Amazon Fire set-top box TV. And in July, it launched the Fire Phone.
The company that seems to want to gain market share in every profitable nook and cranny couldn't pass up on the mobile payment business, which is undergoing tremendous growth.
According to data compiled by Statista, global mobile payment transaction volume was expected to increase from $163.1 billion in 2012 to $235.4 billion in 2013. The statistics firm predicts those numbers will jump to a whopping $721 billion by 2017.
What's more, more than 90% of U.S. retail sales still take place in physical stores, according to U.S. government data.
Amazon will use its same old bag of tricks to break out in the mobile payments sector – it's undercutting the competition to get a foothold, just like it did with the Kindle, the Fire Phone, etc.
Popular mobile payments startup Square charges a 2.75% transaction fee; Paypal charges 2.7%. Amazon Local Register will charge a lower introductory fee of 1.75% for small businesses that sign up before Oct. 31, and that rate will last through the end of 2015. But even without the "act fast" tactic, Amazon's regular rate of 2.5% still undercuts the competition.
"I've actually heard some business owners say the only thing that would make them change (point of sale) systems is cost savings," Swann said.
That'll be a problem for Square, which is already operating on a paper thin profit margin. Square lost approximately $100 million in 2014 and has gone through half of the $340 million in its venture capital funding, according to The Wall Street Journal. The report went on to say that when a deal between Square and Starbucks (Nasdaq: SBUX) fell apart last year, it cost Square around $20 million.
As Amazon widens its moat with Local Register, AMZN stock is primed to benefit.
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