This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How Amazon Intends to Crush Square in Mobile Payments

Updated from 12:05 p.m. to include statement from Square.

NEW YORK (TheStreet) –– Amazon (AMZN - Get Report) is taking on payments stalwarts PayPal and Square in another move to build market share at the expense of short term profits.

Amazon Wednesday announced Amazon Local Register, a card reader and mobile app that will allow local businesses to accept credit and debit cards from a smartphone or tablet, much the way Square does with its Square Reader. Amazon said it will charge merchants a 1.75% rate per transaction for customers who sign up for the service prior to Oct. 31. Accounts that sign up after Oct. 31 will have the standard 2.5% rate on all transactions, and manually keyed in transactions will cost the merchant 2.75%.

By contrast, Square takes a 2.75% flat fee on all transactions.

The market for mobile payments is an enormous opportunity, and one that Amazon appears right to move into, said B. Riley & Co. Scott Tilghman analyst, who believes the new service should help Amazon in the long run. In a phone conversation, Tilghman said in addition to competing with others offering similar services, Local Register will help Amazon learn what people are buying locally. That will allow the e-commerce giant to better "target markets," according to Tilghman, and ultimately compete with those merchants using the new payment system.

Must Read: Is Amazon Trying To Do Too Much?

Industry research firm Gartner expects mobile payments to grow to $721 billion by 2017, with more than 450 million people using the method to make purchases. 

Amazon Local Register works with several iOS devices, including the iPhone 5s, 5c and 5, as well both the iPad and iPad mini. It also works with several Samsung phones, the Samsung Galaxy S3, S4, and S5, and the Amazon Fire HD and Amazon Fire HDX tablets. Curiously, does not work with Amazon's own Fire phone just yet. Amazon said compatibility with the Fire phone is "coming soon."

Beginning next week, the card readers will be available at Staples (SPLS) retail stores nationwide.

Amazon is also using its hardware prowess to beef up its offering. In addition to the $10 card reader (Amazon will refund the cost after the first successful transaction) that its offering, the company is bundling its 8.9-inch Kindle Fire HDX tablet for $380, to allow businesses to both read the credit cards, and process the actual transactions. Amazon also announced, "Kindle Fire HDX owners can take advantage of the Mayday button to connect to an Amazon tech advisor 24 hours a day, 365 days per year – for free."

The move into payments comes at a time when investors are increasingly unhappy with Amazon. In late July, Amazon said net sales rose 23% from the first quarter to $19.34 billion, but the company reported a net loss of $126 million, or 27 cents per share. Analysts polled by Thomson Reuters had expected a loss of 15 cents a share. Amazon blamed the second quarter loss on the large number of new investments it had made. On the earnings call, CFO Tom Szkutak said, "The increase in capital expenditures reflects additional investments in support of continued business growth consisting of additional capacity to support our fulfillment operations and investments in technology infrastructure including Amazon Web Services." Amazon also forecast an operating loss for the third-quarter between $810 million and $410 million, well above expectations of $25 million.

Shares of Amazon have fallen 7.5% over the past six months, compared to the 4.2% gain in the NASDAQ.

Despite the increase in losses, Telsey Advisory Group analyst James Cakmak agrees Amazon’s move is a positive for the company. In a phone interview, Cakmak said Local Register "is another step in the grand plan for Amazon to be a more effective local player. Being a lower cost provider of goods and services should help them gain share against brick and mortar competition."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $92.44 -0.85%
AMZN $663.10 0.61%
GOOG $706.69 0.75%
FB $118.65 0.71%
TSLA $212.85 0.62%


Chart of I:DJI
DOW 17,659.79 -0.92 -0.01%
S&P 500 2,046.33 -4.30 -0.21%
NASDAQ 4,701.82 -15.2740 -0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs