Payments

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Bryan Yurcan
Bryan Yurcan
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The Escalating Payments War

Amazon Local Register is the latest payments product to be introduced by a nontraditional financial institution.

Yesterday, Amazon made waves with the announcement of its Amazon Local Register, a secure card reader and mobile app designed to provide businesses with the ability to accept credit and debit cards from a smartphone or tablet.

Many painted this as a broadside against Square, perhaps the most notable in the mobile card reader space. Amazon introduced an introductory swipe fee of 1.75% that lasts through the end of 2015. After that period, the rate becomes 2.5% per swipe, which is still below Square's current 2.75%.

But this latest news is more than just about a battle between Square and Amazon. Square has already moved beyond just card-swiping capabilities, including things like an appointment-scheduling service and small-business lending. Amazon itself has delved into payments-related products prior to this. Last December it acquired mobile payments startup Gopago, as well as offering payments services like Checkout by Amazon. With its large, built-in customer base of more than 200 million, Amazon can become an even bigger player in the payments space.

Banks should be paying close attention to all of this, if they are not already. Payments is perhaps the easiest arena for disintermediation, with many technology companies creating payments offerings. While banks will likely never be completely cut out of the payments ecosystem, they do run the risk of being reduced to back-end facilitators of transactions, while the likes of Amazon and others provide the customer-facing services. Indeed, Ben Katz, CEO of Card.com, says that consumer culture "is rapidly becoming mobile-first and industry giants like Amazon are trailblazing the way for new financial services that are accessible, affordable, and in many cases, fun."

Players like Amazon will continue to delve further into payments, even if they have no desire to become full-fledged financial services providers. Which means that banks need to place a high priority on payments innovation.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
8/18/2014 | 12:48:04 PM
Re: Don't forget about Fire Phone
The data is the important thing here. Amazon is already hurting a lot of brick and mortar retailers, and has a ton of data on how people shop online. This move would give them more data on how people shop in stores. They could come out of this with a very complete view of consumers' shopping habits and spending patterns.
Byurcan
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Byurcan,
User Rank: Author
8/18/2014 | 12:08:43 PM
Re: Don't forget about Fire Phone
There's definitely revenue opportunity abounding in there.
KBurger
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KBurger,
User Rank: Author
8/18/2014 | 12:06:32 PM
Re: Don't forget about Fire Phone
I guess it depends on where the revenues are -- or (maybe better?), the data that can be mined and potentially turned into revenues.
Byurcan
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Byurcan,
User Rank: Author
8/18/2014 | 11:01:50 AM
Re: Don't forget about Fire Phone
And it's possible many abnks won't mind being the back-end provider of transactions services. But you imagine the bigger banks will also want to be involved in the customer-facing part as well
KBurger
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KBurger,
User Rank: Author
8/15/2014 | 3:12:00 PM
Re: Don't forget about Fire Phone
That's a good point, Bob. Maybe the reality is that banks already are marginal or secondary players in the payments eco-systems and are really not the players that are going to be disrupted/disintermediated by the likes of Amazon. Thanks for the feedback.
Byurcan
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Byurcan,
User Rank: Author
8/15/2014 | 2:22:03 PM
Re: Don't forget about Fire Phone
Thanks for reading Bob. Yes it is definitely a move against Square more than anything, but as you mention getting that swipe fee is also valuable.
bob_graham
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bob_graham,
User Rank: Apprentice
8/15/2014 | 2:11:18 PM
Re: Don't forget about Fire Phone
Byran

 

Good article and interesting point of view on the banks.  I do view it however as more a target against Square and mobile payment providers.   The banks are already at the back end of Amazon's food chain already as a processor and this does not change the dynamic much.  

It does however represent a lost opportunity to get 1.75 to 2.75% in swipe fees by not having a competing product....
Byurcan
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Byurcan,
User Rank: Author
8/15/2014 | 9:15:21 AM
Re: Don't forget about Fire Phone
Yes, I have written befor eabout the potential of the Fire Phone as Amazon continues to be a payments innovator. The bottom line, with their built-in customer base, amazon has a great platform for payments.
KBurger
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KBurger,
User Rank: Author
8/14/2014 | 2:56:14 PM
Don't forget about Fire Phone
And don't forget about the Amazon Fire Phone. While it's not yet clear whether or not it will be successful and make inroads against iPhone and Android, what is clear is that its capabilities have a strong focus on commerce. So one way or another Amazon definitely intends to be a player/disrupter in payments.
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