In 2010, every banking software company wanted to beat Jack Dorsey’s brilliant company Square.
Its iPhone-based credit card capture system had taken small businesses by storm. Suddenly, every kid on the block could accept credit cards at her lemonade stand.
It opened up a whole new stream of revenue by cutting into a previously all-cash economy. No longer would financial agencies have to rely on commercial institutions as a source of interchange fees. They could get them from any person-to-person transaction.
Suddenly, dozens of banking and personal finance companies followed suit. Intuit debuted QuickBooks Payments, VeriFONE debuted PAYware mobile, and PayPal debuted Here. Dozens of regional banks offered their own versions, and white-label companies offered panacea solutions for the rest.
They all did essentially the same thing: let individuals accept credit cards for a per-swipe transaction fee.
Amazon has finally arrived to the mobile credit card swiping party. It’s a bit late, but it’s sweeping the legs out from all of its competitors.
The Puzzle is Complete
Amazon has launched a new service called Amazon Local Register. Like all those other services, it lets its users turn their mobile devices into portable “cash registers.”
To get started, users set up a merchant account, download a mobile application (compatible with Android, IOS, and Amazon’s FireOS), and attach the credit card-swiping dongle to their smartphone or tablet. It’s no different from any of the others in that respect.
Amazon also sells accessories for businesses to integrate Local Register into their traditional payment structure; these include tablet cases and stands, cash drawers, and receipt printers.
This is all important because Amazon Local Register is the final piece that turns Amazon into an end-to-end platform for small businesses.
A business can use Local Register for in-person credit transactions, Amazon Payments for online transactions, the actual Amazon site for e-commerce and marketing, and the Amazon Services architecture for order fulfillment, advertising, and the rest of the essential merchant needs, including Web hosting, data management, and even customer service.
What’s the Big Deal?
The fact that Amazon’s merchant services offering is more or less comprehensive should be bad news for financial tech companies like Intuit (NASDAQ: INTU) and PayPal, which is owned by eBay (NASDAQ: EBAY).
These competitors can each offer comparable services, they cannot offer a position inside the number one e-commerce site in the United States.
Mark my words, this is a gravely serious threat.
A strong presence on Amazon has been shown to increase merchant sales significantly. Outdoor sports store The Clymb, for example, claims to have increased sales by 10% simply by adding Amazon Payments as a button on its site. Bedding retailer US Mattress increased conversions by 180% by having its products show up as sponsored results while targeted Amazon shoppers browse.
But those are marketing testimonials collected by Amazon itself. We don’t need to know anything about conversions to know Amazon is an extremely strong place to center your small business.
It’s got 244 million users, after all.
So it’s got the biggest e-commerce network, a huge roster of related services, and a super cheap credit swiping system.
Amazon is undercutting competitors by hanging onto one of the lowest per-swipe charges on the market. Until January 1, 2016, Amazon is only charging 1.75% per swipe. That’s the same as Intuit’s lowest per-swipe rate, but Intuit charges $19.95 per month for users to have access to it. PayPal’s Here charges 2.7% per swipe, and Square charges 2.75% per swipe.
For the next two years Amazon Local Register is going to be the cheapest, most comprehensive mobile card acceptance solution going.
Amazon might be a late entrant to this market, but it is coming into it with guns blazing.