The new service is called Local Register and will provider stores with a card reader that can be used to process payments on smartphones and tablets and an app to make direct payments. Amazon will compete with established players like PayPal and Square, but will attempt to gain ground with aggressive pricing.
The online retailer will provide merchants free two-day shipping on Amazon.com and the app will be available on the Amazon Appstore, Apple App Store, and Google Play. Starting next Tuesday, the card reader will be available at Staples stores for $10.
Amazon is promising merchants who sign up before October 1 a transaction of rate of 1.75 percent on swiped transactions till Jan.1, 2016, and a flat rate of 2.5 percent after that. Square charges merchants 2.75 percent and PayPal 2.7 percent per transaction.
"We understand that every penny and every minute counts, so we want to make accepting payments so easy and inexpensive that it no longer gets in the way of a business owner doing what they love -- serving their customers and growing their business," said Matt Swann, vice president of Amazon Local Commerce.
This will be Amazon's first foray into actual retail stores, where more than 90 percent of commerce is still conducted. It will also allow the online retailer to collect data on consumer spending trends.
The new initiative shows that Amazon is not going to stop its aggressive expansion plans, which includes its Prime streaming service, a grocery delivery service, the Fire Phone, set-top box Fire TV, and investments into drone delivery plans.