Amazon's New Secret Weapon: A Credit Card Reader

Not content with dominating online retail, is looking to muscle its way into your local mom-and-pop shops with a new credit card reader. The company on Wednesday unveiled Local Register, which allows small merchants to swipe credit cards using a tablet or smartphone.

Local Register will go head-to-head with Square and eBay 's PayPal, both of which have similar devices. Unlike Square and PayPal, however, Amazon doesn't seem intent on making this payments-processing business profitable. Instead, it can undercut the competition to gain market share and gather valuable consumer data from brick-and-mortar retailers.

Amazon is offering free analytics tools as part of Local Register. Source:

On the other hand, by partnering with Amazon, businesses are opening up their sales data to a ruthless retail giant. It's not uncommon for a business that has success selling through Amazon to quickly find itself in competition with its onetime partner.

Of course, many businesses can benefit from Local Register without fear of Amazon using its data to compete with them. Restaurants, salons, and other service-based businesses would be smart to take up Amazon's product.

Amazon can still use that data to improve its retail business. If it sees that one of its shoppers often swipes a credit card at a Mexican restaurant, for example, Amazon might start promoting Mexican food-related products like margarita glasses or a quesadilla maker. With 240 million credit cards on file, Amazon is bound to harvest some very useful data no matter who uses the product.

Billions of dollars await

The mobile payments market is growing rapidly. Research firm Gartner expects the industry to grow to $721 billion in 2017, although most of that will involve direct money transfers. Competition is fierce in the space, and other big companies are expected to come into the market. Amazon ought to be able to undercut everyone, taking a loss on the business to fuel its giant retail operations.

Your credit card may soon be completely worthless

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The article Amazon's New Secret Weapon: A Credit Card Reader originally appeared on

Adam Levy owns shares of The Motley Fool recommends and owns shares of and eBay. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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