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Amazon Local Register card reader takes aim at Square

Amazon has released a credit card reader for smartphones and tablets that aims to undercut the likes of PayPal and Square by offering rock-bottom transaction fees.

Related: Square card reader cracked live at Black Hat

The Local Register device is a small black card reader that fits into the headphone slot of any compatible smartphone or tablet and allows the merchant to take quick credit or debit card payments with a special discounted fee of just 1.75 per cent per transaction for early adopters.

It costs $10 [£6], which is immediately credited to the account to be used on transaction fees, and after the discounted period is up on 1 January 2016, the app charges 2.5 per cent per transaction.

That latter figure is still less than both Square and PayPal charge small businesses with the former levying a 2.75 per cent fee per swipe and PayPal’s Here service taking 2.7 per cent for each swipe.

Fast Company has estimated that on every $100 [£59.91] transaction made using a Square reader, the company passes $1.82 [£1.09] to other financial companies and keeps 94 cents [56p]. Analysts are already worried what implications Amazon’s entry could have for Square.

"There is still a sizeable window for big brands to exploit in this space, and Amazon will be seeking to leverage the consumer trust it has to offer what is effectively a cash register to the small business market," said Windsor Holden, research director at the Juniper Research consultancy, according to the BBC. "Given the size and scale of the company relative to Square, Amazon is in an exceptionally strong financial position. Square may now find itself struggling to compete on an equal basis."

Related: Apple to partner with Square for iPhone 5 mobile payment technology?

Amazon’s Local Register card reader is currently only available to customers with a US billing address and it works with all recent iPhones, iPads, Samsung Galaxy S handsets and Kindle Fire tablets, but not the Fire smartphone.