Amazon launches its own credit card reader, undercuts Square on transaction fees

Amazon(s amzn) on Wednesday unveiled Local Register, its take on the mobile credit card reader that lets small merchants take payments from their smartphones and tablets. The reader works with Amazon’s Fire HD and HDX tablets, as well as on iOS devices and a limited number of Samsung Android(s goog) smartphones, but surprisingly it isn’t compatible with the new Fire Phone – at least, not yet.

Dozens of companies have challenged Square in the mobile point-of-sale space, but none so far have had Amazon’s brand recognition. What’s more, Amazon appears to be going for Square’s jugular in pricing. Its standard fee on any card swipe is 2.5 percent of the transaction amount, while Square charges 2.75 percent.

Amazon Local Register tablet

What’s more, Amazon is offering a promotion to retailers that sign up for Local Register before October 31: It’s dropping its transaction fee to 1.75 percent until January 1, 2016. That full percentage point difference could represent enormous savings over the next 16 months for any merchant making the switch from Square or a comparable smartphone point-of-sale system like PayPal’s(s ebay) Here (which charges a 2.7 percent fee on transactions).

The device will cost $10, but Amazon will credit that cost against the merchant’s first transaction fees. Like Square, Amazon is going for simplicity. It isn’t charging any recurring fees, requiring any contracts or creating a complex fee structure for chargebacks, refunds or international card transactions. The only time a different fee applies is when the retailer has to manually enter a credit card into Local Register’s app. That fee is 2.75 percent of the transaction cost.

The reader will work with almost all Apple devices: the iPhone 4 or later, the iPad and the iPad mini, as well as the Samsung Galaxy S3, S4 and S5. The device connects through the auxiliary jack of those devices and communicates with a Local Register app available in the iTunes and Google Play stores.

While the Amazon app will offer a basic complement of business tracking and sales tools across all supported devices, Amazon is reserving the best functionality for merchants that go with a Fire tablet. The Fire version of the Local Register app will integrate with Mayday, allowing a retailer to connect with a technician instantly to troubleshoot any problems with the system. iOS and Samsung device users will have access to customer support through email and a support line.

Presumably support for more devices will come soon, and not just more Android slates and phones. Given its focus on commerce, Amazon’s recently launched Fire Phone seems an ideal candidate for the mobile payments service.

There’s also another key tie-in with Amazon’s other services. Funds from any transaction will be deposited into a merchant’s bank account on the following business day, but Amazon will let that merchant use those funds immediately for any purchase on Amazon will also sell several peripheral point-of-sale devices that work with Local Register, such as cash drawers and receipt printers.