Amazon's launch of a mobile card reader should force many mobile point of sale companies to reevaluate whether their own offerings are distinct enough to ensure their survival.

Amazon's Local Register device launched with an aggressive pricing promotion designed to undercut companies like Square and PayPal. Its promotional rate of 1.75% per swipe lasts until the end of 2015, but only for merchants who sign up by Oct. 31, 2014, a move that may be designed to win merchants away from other mobile point of sale providers before those vendors have time to react.

"[Mobile point of sale] vendors that have neglected to differentiate themselves in any substantial way are most at risk by Amazon's mPOS play," said Jordan McKee, a senior analyst at 451 Payments.

The mobile card acceptance market includes a number of companies with less name recognition and financial heft than Square, and these companies are chasing a market where the core technology is losing its wow factor.

"The payment acceptance component of mPOS is commoditized, and those lacking unique value propositions will lose to low-cost providers," McKee said. "The future of mPOS is all about services, software and platforms. Any vendor lacking a distinct set of capabilities will fall to the wayside."

Flint, for example, says it distinguishes itself through a hardware-free approach to mobile card acceptance. It scans card details using the phone's camera, making it a better fit for "on the go" businesses than those that operate from a physical store, said Greg Goldfarb, CEO of Flint.

"It doesn't take time to set up and get going. And once [the chip-based payment card standard] EMV comes here in the U.S., the hardware for EMV will be more complicated and it will be more expensive," Goldfarb said.

Despite the short deadline on Amazon's pricing promo, there are some outspoken merchants taking a "wait and see" view of the reader. Local Register has an average review score of two stars out of five on Amazon.com, with the most prominent reviews criticizing the device's enrollment process.

Amazon may also face challenges from small businesses who view Amazon as a direct competitor, said Jason Richelson, founder and co-CEO of ShopKeep, a provider of tablet-based point of sale systems.

ShopKeep recently sent a letter to its merchant clients to warn them that Amazon's device may give Amazon a glimpse at their customers' shopping data.

"If you go into a local store and buy a towel, the next time when you log into Amazon you will see towels or a towel rack for sale," Richelson said in an interview. "Amazon knows what you purchased."

ShopKeep differentiates itself by offering "a full management suite, such as inventory management, CRM and employee management," Richelson said.

In an email response to questions about ShopKeep's letter and the Amazon Local Register user reviews, Amazon spokesperson Julie Law said, "Our positive swipe rate is one of the highest in the industry. Also, all data from Amazon Local Register customers is securely protected. It will not be used for any purpose other than fraud protection and risk management for Amazon Local Register."

There are also plenty of angles that companies can take to find a niche in the mobile point of sale market, said Rick Oglesby, a senior analyst and consultant at Double Diamond Payments Research.

"They can specialize depending on merchant vertical and/or merchant size, and they can differentiate themselves at the feature level across loyalty, marketing, CRM and back-office needs, as well as through branding and relationship building," he said.

While payment-only offerings will be under pressure, Amazon's largest threat is its ability to leverage its consumer base to deploy demand generation tools for local merchants, Oglesby said.

"When that solution comes to market, it will be a key differentiator that will be far more powerful than price competition," Oglesby said. "Companies that lack differentiated solutions will be squeezed out regardless of what Amazon does, although Amazon will accelerate the process."

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