Wednesday Aug 13, 2014

Amazon Payments

Today Amazon announced a card reader that competes with the likes of Square, compatible with both Android and iOS devices.  This new foray fits the "fast follower" pattern we've seen with Amazon for tablets, streaming content, set-top boxes, etc.  When they see a need that's not being filled, or in this case can be filled better, they dive in.  Where Square charges 2.75% and PayPal charges 2.70%, Amazon will initially charge 1.75% then eventually 2.50%.  This will put added pressure on Square, which is already struggling.  Amazon picks a business then drives down prices, which customers love and competitors hate.

But all these payment companies are giving away most of their revenue to the likes of Visa, MasterCard, and Amex.  In fact, most of emerging payment technologies are still backed by credit cards, so the processors can't be avoided.  A few, like PayPal, have tried to rely on ACH, which a cheaper way to process payments.

One of my favorites in this area is Dwolla, a payment processor I first wrote about in 2011.  They charge a flat $.25 for transactions over $10 and payments under $10 are free.  Today, CEO Ben Mine was on Fox Business Closing Bell to say he didn't mind the competition from Amazon.

Just as eBay acquired PayPal, Amazon should buy Dwolla or a similar payment network.  It certainly would help keep costs down if Amazon could cut credit card companies out, something all retailers want.  By that same token, perhaps MCX might consider a similar move.  Retailers are desperate for a secure, convenient way to take payments without high fees.

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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