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Bill Rand Comments on Amazon Mobile Card Reader

Aug 19, 2014
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Latecomer Strategy Propels Amazon Local Register

Mobile card reader will give Amazon new access to offline consumer data, UMD Expert Says

Amazon's push into a mobile payment space targeting brick-and-mortar merchants with Amazon Local Register means the online retail giant is poised to leverage new insight into offline shoppers, a University of Maryland expert says.

The new product combines a $10 secure card reader and free mobile app that merchants can use to process credit and debit card payments using smartphones or tablets. The product also includes customer support and in-app tracking capabilities. This mobile point-of-sale service competes with the likes of Square and PayPal Here and undercuts their 2.7-percent transaction fees, as well as the transaction fees charged by traditional credit card companies. In addition to its 2.5 percent rate per swiped transaction, Amazon offers a 1.75 percent promotional rate for signing up before Oct. 31.

Bill Rand, assistant professor of marketing and computer science and director of the Center for Complexity in Business at UMD's Robert H. Smith School of Business, delves into the pluses and minuses for Amazon and face-to-face retailers who adopt Local Register:

Challenges and Benefits to Amazon

"Amazon, like its competitors, faces the reality that mobile payment technology is still not widely adopted by both consumers and retailers. When factoring in Amazon Payments' full suite of mobile payment solutions, Amazon has entered the niche late, and so it does not have a significant marketing advantage. However, Amazon can leverage its advantage of knowing more than its mobile payments competition about what its consumers buy.  If it can successfully tap into this knowledge to provide the right incentives and promotions for use of mobile payments, it can potentially leapfrog the competition.

"A strong benefit to Amazon is that the mobile payment space is more valuable as a data source than as a revenue stream. Amazon does a great job of collecting and analyzing data about what its customers are looking at, reading about and purchasing online. But it has very little knowledge about what they are purchasing offline. With Local Register, it can now collect additional data about those consumers and use it to influence both online and offline promotions.”

Pros and Cons for Merchants

"Amazon’s strength in information security translates to its lower transaction fee for retailers. In the long run, Amazon also could provide retailers with analytics about consumers to help improve their operations. A likely hurdle for these businesses is a skills shortage that would hinder leveraging such data. Moreover, as Amazon adds to the number of mobile payment platforms, retailers are increasingly challenged to compare the vendors and select one that best suits them."

Contact Bill Rand at 301-405-7229 or wrand@rhsmith.umd.edu.

About the University of Maryland's Robert H. Smith School of Business 

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.