Everyone seems to want the success that Square has in the mobile payments marketplace, and Amazon appears to be the next in line to join the device fray.

Seeing the success of mobile point-of-sale solutions, many technology providers are jumping at the opportunity to participate, but does this rapid evolution of card-readers hurt the space’s first innovator, Square?

Amazon is readying its own mobile POS product, rumor has it, only two weeks after Groupon launched its POS product—a card reader that clips to merchants' smartphones.

Amazon hasn’t publicly discussed the prospects of a card reader mobile device and a spokesperson reached via email declined to comment “on rumors or speculations.” A recent report on TechCrunch brought attention to Amazon's rumored plans, citing among its sources a much earlier report from Bloomberg News.

Even if Amazon.com won't comment on its plans, industry observers find it quite likely that Amazon would develop such a product.

“Mobile payment is such an important developing technology trend that all the large technology providers want to participate and invest in it,” says Gil Luria, analyst with Los Angeles-based Wedbush Securities.

The world’s largest online retailer plans to differentiate itself in the mobile payments marketplace by targeting small merchants, including the many small retailers that are current Amazon customers. Amazon is trying to take advantage of its strong brand and large relationship base, hoping current customers will prefer to do business with a trusted partner, says David Kaminsky, an analyst at Mercator Advisory Group.

Plus Amazon is rumored to offer a cheaper transaction rate of 1.9%, compared to the standard 2.7% rate currently charged by market participants.

“There’s not much to do to differentiate themselves, besides continuing to offer lower prices,” Luria says.

Luria says recent providers of the mobile POS card-readers, such as Intuit, eBay and Groupon, aren’t necessarily trying to make money with these devices, but instead extend customer relationships.

Square, co-founded by Twitter founder Jack Dorsey and Jim McKelvey, was the first mobile POS card-reader to emerge.

"Square has illustrated that merchants have a lot of power in determining how mobile payment is going to develop," says Brian Scott, vice president of The Members Group, a Des Moines-based card processor and payments consultant.

Merchant adoption of Square's mobile card-reader "has been amazing," Scott says. Square is processing $10 million a day in payments with a technology that is only 18 months old, he notes.

"The amount may not be huge in the payments world, but it certainly shows a lot of merchant interest in a short period of time," Scott adds.

Although unintentional, Square’s success led others to follow, which might be damaging to the electronic payment service. “What’s happening in the mobile POS space is very similar to what happened in the daily deals space,”Kaminsky says.

Mobile POS products have exploded like daily deals websites did when Groupon first emerged. The mobile POS solutions space has very low barriers of entry, Kaminsky says, so it was easy for other providers to create similar products.

As the marketplace becomes more crowded with providers that aren’t worried about revenue from the mobile POS card-readers, Square might suffer from the competition, since it wants to make money through its product. Luria says that’s why Square has really been pushing other products, including its mobile wallet.

But it’s not going to be easy for Square, says Kaminsky. Many players that create mobile POS solutions now are going to add extra features on top to provide more service.

Kaminsky gives Intuit as an example, saying the American software company created its own mobile POS solution, GoPayment, that ties the transaction into the company’s QuickBooks business management software.

“It’s a lot easier for Intuit to create a mobile POS solution, than it is for Square to create a whole business accounting program,” he says.

But he acknowledges that Square has the advantage of being the first in the market and for many people, “square” has become synonymous with mobile card-readers. And like the daily deals space, Kaminsky believes that by mid-2013, most providers will see the space saturated and pull back to allow the most competitive differentiators to take over.

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