Amazon challenges Square with payment system

New York - US online giant Amazon unveiled a new payment card reader for mobile devices on Wednesday in challenging a system pioneered by Square.

The e-commerce giant unveiled its "Amazon Local Register", described as "a secure card reader and mobile app that provides local businesses with the tools they need to quickly and easily accept credit and debit cards from a smartphone or tablet and keep track of their growing business".

The move expands Amazon's efforts to gain a foothold in the payments business in addition to its traditional role as a retailer.

Amazon launched its payment service in 2013, allowing people to make one-time payments to third parties and later unveiled a system for recurring payments.

With the card reader, Amazon will get a 2.5% commission on sales, but is offering a promotional rate of 1.75% for customers who sign up by 31 October, a rate that will remain in place until 2016.

Fees

"From clothing stores to contractors, food trucks to accountants, businesses and organisations using Amazon Local Register will enjoy industry-leading low rates, trusted and secure payment processing, and access to award-winning customer support," said Amazon's Matt Swann.

"We understand that every penny and every minute counts, so we want to make accepting payments so easy and inexpensive that it no longer gets in the way of a business owner doing what they love - serving their customers and growing their business."

Merchants can buy a mobile reader for $10 and attach the device to many tablets and smartphones. Amazon will credit back the first $10 in transaction fees, making the device free.

Amazon will also allow transactions to be processed through a mobile app without the use of the reader.

The fees from Amazon undercut the system used by Square, a payments processor set up in 2010 by Jack Dorsey, one of the founders of Twitter.

Square takes a 2.75% cut on sales from its card reader and 3.5% plus 15c from its mobile app.

PayPal, a unit of the online giant eBay, also has a card reader and gets a 2.7% commission per swipe.