Amazon's mobile card reader could be gold mine of data

Credit card readers

Amazon has joined the club and created a card reader, making transactions easier for small retailers

Several companies, including Square and PayPal, have made it easier for small retailers to accept credit cards; they make card readers that plug into smart phones and tablets. Well, those companies have new competition from Amazon.

Sure, there is money to be made from processing mobile payments – a cut of every dollar.  But something else is driving Amazon’s decision to get into this sector - data.  The e-retailer already knows a lot about how we shop  – what we search for, what ads we click and what devices we use.

“Within Amazon’s world, they have a tremendous insight into our online behaviors,” says Colin Gillis, a tech analyst with BGC Partners. “But they don’t have access into our offline purchasing.”

Gillis says that, with this new product, known as Amazon Local Register, the company will collect new data on what we buy at stores and restaurants.  “That insight into our offline behavior will be useful to them,” he says.

Amazon wants to know what we buy regularly and how we pay for those items. In the future, the company could sell us those items.

According to James Cordwell, an Internet analyst with Atlantic Equities, Amazon - which makes less than a penny on every dollar of revenue - is under more pressure than ever to make money, and Amazon Local Register could help the company do that. “But over and above that,” he says, “it’s about further locking in third parties into its platform.”

R.J. Hottovy, an analyst with Morningstar, wonders if local retailers will be interested in that, even though the company charges less per transaction than Square or PayPal.

“There is going to be some reluctance on the part of small merchants to share any kind of data with Amazon,” he says. That’s because data that could benefit Amazon could hurt those small merchants in the long run. If Amazon sees that your business is doing well, Hottovy says, there is nothing to stop it from competing against you.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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