Amazon launches a credit card reader to tap the vast physical retail market

In the previous part of this series, we discussed how the physical retail market still constitutes the majority of the retail market despite the e-commerce market growing fast. No wonder pure online players are now looking to enter the physical retail world.

For example, Amazon (AMZN) recently launched a credit card reader. Merchants can use it to conduct payments through a smartphone or tablet. This card reader is similar to Square’s card reader, which we find at various merchants. According to a report from the Wall Street Journal, Amazon will undercut its competitors with low processing fees. Amazon’s 1.75% fee would be lower than Square’s 2.75% and eBay (EBAY) Paypal’s 2.70%.

Lower processing fees are bound to have an impact on its margins, but Amazon is known to sacrifice its margins for revenue growth. Market Realist described this approach in an article titled Why Amazon’s operating margins are declining this year. You could consider exchange-traded funds (or ETFs) such as the DJ Internet Index Fund (FDN) and PowerShares QQQ Trust (QQQ), which have high exposure to Amazon.

Must-know: Why did Amazon launch a mobile credit card reader?

Merchants are already embracing mobile card reader technology

According to a report from Business Insider citing Market Strategies International, mobile card readers are already accepted by 40% of the small and medium merchants across the U.S., as the chart above shows. Square is a leading player in this market. It recently raised $100 million at a valuation of $6 billion, according to a report from Fortune.

Prior to this valuation, Square had raised funding from a number of investors, including Starbucks (SBUX). Starbucks invested in Square in 2012 at a valuation of $3.25 billion. This was part of a broader arrangement to process payments in its stores through Square’s technology. But with Amazon coming into the fray—and that too with lower processing fees—Amazon will increase competitive pressure on Square.

Latest articles

26 Mar

Cronos Group's Q4 Earnings: Key Takeaways

WRITTEN BY Adam Jones

On March 26, Cronos Group (CRON) reported its fourth quarter and fiscal 2018 earnings results before the market opened.

26 Mar

Apple's New Services: Morgan Stanley Approves

WRITTEN BY John Parker

According to Thomson Reuters, Morgan Stanley raised its target price on Apple stock to $220 from $197.

BlackBerry (BB) sued Twitter (TWTR) last month in a patent infringement dispute.

26 Mar

Will US Oil Exports Continue to Rise?

WRITTEN BY Robert Scott

On March 25, Brent crude oil May futures settled ~$8.4 higher than the WTI crude oil May futures. On March 18, the spread was ~$8.2.

26 Mar

What Could Impact Natural Gas on March 26?

WRITTEN BY Robert Scott

Based on the weather forecast on March 25, the total degree days for the next two weeks moderated from 247 on the previous day to 225.

Shares of General Mills (GIS) have outperformed the broader markets so far this year for a number of reasons.