UPDATE 1-Amazon.com takes on PayPal, Square with credit card reader

Wed Aug 13, 2014 12:28pm EDT

(Adds analysts' comments)

By Deepa Seetharaman

SAN FRANCISCO Aug 13 (Reuters) - Amazon.com Inc unveiled a $10 credit-card reader and mobile app for businesses on Wednesday, expanding further into bricks-and-mortar retail and the rapidly evolving mobile payments arena.

The move pits Amazon against a slew of rivals including startup Square, which popularized a card swiper that plugs into a smartphone or tablet and allows small- and mid-sized businesses like food trucks and coffee shops to quickly accept credit and debit transactions.

The new point-of-sale system, called Amazon Local Register, would give Amazon crucial data on how U.S. consumers shop offline, analysts say. More than 90 percent of U.S. retail sales still take place in physical stores, according to U.S. government data.

On Wednesday, an Amazon spokeswoman said all data from Amazon Local Register customers would be securely protected and would not be used merely for fraud protection and risk management.

"There may be some hesitation among merchants to process payments through Amazon due to data sharing or competitive concerns," R.W. Baird analyst Colin Sebastian wrote on Wednesday.

The biggest technology firms like Apple Inc and Google Inc may also step up their investment in mobile payments, which is taking off as smartphones become ubiquitous.

Amazon hopes to court small businesses in part by charging lower fees than Square and eBay Inc's PayPal. Those who sign up for Amazon's program before Oct. 31 will be charged 1.75 percent for each card swiped until January 2016.

For those who sign up after October, Amazon will take a 2.5 percent cut of each card swipe, still less than Square's 2.75 percent flat transaction rate and PayPal's 2.7 percent.

Amazon's move "was indicative of the blurring lines between commerce and payments, and ultimately Amazon competing against eBay/PayPal, Google and Apple in the mobile payment space," Sebastian said. (Reporting by Deepa Seetharaman; Editing by Lisa Shumaker and Andrew Hay)

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