On Wednesday morning, Amazon (NASDAQ:AMZN) announced the launching of a credit card reader. The reader will plug into the headphone jack of mobile phones and tablets, just like Square, PayPal and others in the industry. This move is a definite negative for eBay (NASDAQ:EBAY), as PayPal represents a staggering 54% of its operating income.
Amazon, similar to other endeavors, will undercut its competitors. It will take a 2.5% cut of each card swipe, which is less than Square's 2.75%, and Paypal's 2.7%. Further, Amazon will give merchants an incentive to sign up, as they will give them a special rate of 1.75% until 2016 if they sign up by October 31. Amazon will have an advantage over others in the industry, as merchants will have access to data on sales trends, peak sales times, as well as more information. Coupling this off sale information with its current database will allow Amazon to have a superior database of retail sale info.
In my previous article, "The Dynamic Payment Industry - Will eBay Suffer?," I opined that the payment industry was being commoditized and eBay would falter because of the trend. I also discussed how Amazon was already entering the industry with the announcement of allowing customers to automatically pay recurring charges by using their Amazon log-in credentials. With others such as Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) also entering the fray, eBay faces serious headwinds ahead.
Disclosure: The author is long FB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. I also own FB LEAP Call options.