Here's Why It Makes Sense That Amazon Just Launched Its Square-Killer
Amazon plans to crush the competition through its signature combo: Excellent customer service and the lowest prices.
When Square first launched, it was notorious for bad customer service, partially because it didn't have a customer support phone line until early 2014. Amazon, on the other-hand, makes sure to highlight its "award-winning customer support" first and foremost.
Amazon will also be offering early adopters super-low swipe fees of 1.75% until January 2016. Its non-promotional fee is 2.5%, which is less than Square's 2.75% rate and PayPal's 2.7%.
Even if brick-and-mortar customers do flock to Amazon, though, it's hard to make money off credit card transactions. Square only gets a tiny cut - and sometimes loses money - with every card swipe it processes. Even if the much-bigger Amazon has a better deal with credit card companies than Square and can dominate the market, small transactions likely won't be very lucrative.
The key for Amazon, however, is that its brick-and-mortar payments ambitions likely extend far beyond its credit card readers.
Right off the bat, Amazon's local register website sells accessories like cash drawers, receipt printers, and reader-equipped cases and stands. It also pitches Amazon Local, a service that helps businesses set up daily deals, as well as Login and Pay with Amazon, which enables websites to let their customers pay through their Amazon accounts. Essentially, Amazon wants to intrigue brick-and-mortar customers with its low-priced card reader, and pull them into its entire ecosystem, in stores and also online.
Re/code's Jason Del Rey spoke to sources earlier this year who said that Amazon also plans to tie together products like accounting software and inventory management systems, with the goal of making its collection of tools "as critical to brick-and-mortar shops as its Amazon Web Services offering has become to online businesses."
Although each individual service might not make much money, having them all work together could mean bigger rewards.
Earlier this year, Amazon payments head Tom Taylor said he felt pressure from CEO Jeff Bezos to "go faster" with the company's payments efforts, and this new dive is clearly a big step in the direction Bezos wants to go.
Also, it's important to remember that Amazon has a long term view of things. Right now it looks like Amazon is launching a bunch of small pieces. In the long run (think 7 years or more) it will tie them all together to fit a grander vision of commerce and retail.
Check out the video Amazon released with its announcement: