In Search of More Data, Amazon Bids Farewell to Payments Hardware

By dropping out of the mobile card reader business, Amazon is focusing on the one-click Pay with Amazon app and further embedding payments into its customer relationship management.

Amazon notified its customers on the Amazon Register portion of its website that the Local Register mobile card reader service would no longer be available to new merchant customers, starting at the end of October, and the service will be completely dropped by Feb. 1, 2016.

“The future of payments is not about swiping cards, but creating connected experiences," Patrick Gauthier, vice president of external payments with Amazon, said in an e-mail to PaymentsSource.

Pay with Amazon helps merchants connect with Amazon customers by extending the buying experience customers know and trust on Amazon.com to thousands of websites around the world, Gauthier added.

Amazon looked serious about entering the mobile card reader arena when introducing Local Register in August of 2014, offering merchants a 1.75% per swipe fee until the end of this year. It was expected that Amazon's swipe fee would be set at 2.5% after this promotional period, which is still lower than its main competitor, Square, at 2.75%.

But Amazon has been able to see the downside of being in the payments hardware business, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.

"Some merchants are waiting for months to get their Square readers with EMV and NFC [Near Field Communication], so Amazon could see where this was going," Crone said. "They know they will be able to facilitate payments between authenticated mobile phone users without any new clunky hardware that just gets in the way."

Amazon announced last week that Pay with Amazon has grown by 180% year-over-year, while also noting its recent survey revealed 71% of Amazon merchants said the payment service increased their conversion rate.

Amazon.com launched "Login and Pay with Amazon" two years ago, seeking a way to let merchants accept payments from online shoppers without requiring them to create a dedicated account.

The service was set up as a way for Amazon to better keep track of repeat customers who were not part of the Amazon Payments service, which allows merchants to accept payments from users who link a payment card to their Amazon.com account.

Last summer, Amazon removed payment apps from a portion of its catalog, and its mobile wallet app and person-to-person payment app also disappeared.

"Amazon sees where payments are going, as embedded into a product like Uber or Starbucks does it," Crone said. "Mobile wallet is a metaphor for an extra step that will be eliminated over time as payments become embedded, and Amazon is definitely in the best position to facilitate that for their user base and commerce partners."

Amazon Prime customers also have access to Amazon Dash Buttons, stick-on buttons that allows users to reorder products from their homes and pay for the service from payment credentials registered with Amazon.

It all points to companies understanding the role of easy payments in increasing customer data, Crone said. Companies are compiling data, with the richest being payment data, and combining it with machine learning to enhance customer services, Crone added. "Amazon invented this and perfected it. We know it today as the recommendation engine, knowing your customers and recommending products to them."