1 Reason To Keep Believing In Amazon.com, Inc.

If appearances were everything, Amazon.com (NASDAQ: AMZN  ) would be a company down on its luck in more ways than one.

AMZN Chart

Amid, what I've argued is little more than a perception problem, investors have fled Amazon's shares en masse so far this year, even as consumers continue to flock toward the world's most dominant e-commerce company.

Thankfully, we don't take much stock in appearances alone here at the Fool.

I've been following Amazon with great interest in the wake of its recent earnings-fueled sell-off, keeping an eye to a potential buying opportunity for an amazing company at a somewhat reduced premium.

And the more I research it, the more I become convinced that, while Amazon's prospects might have reached a recent low in the investing community's eyes, Amazon remains one of the most disruptive and relentlessly innovative companies around. Thankfully, Amazon recently helped prove my point by boldly setting its sights on another multi-billion dollar growth industry.

Amazon Local Register: A winning move 
Earlier this month, Amazon introduced its new mobile payments solution, Amazon Local Register. And although many media outlets noted the move, few seemed to appreciate its big-picture significance.

Source: Amazon

In typical Amazon fashion, Amazon Local Register appears to offer potential users a quick, seamless mobile payments solution akin of Square's or PayPal's increasingly popular mobile card reader. However, perhaps the most defining aspect of Amazon's new mobile card reader is its pricing. As should come as no surprise for those familiar with its corporate philosophy, Amazon plans to compete aggressively on price against the industry's already-established players in hopes of gaining a quick foothold. See for yourself.

Service

Basic Pricing

Amazon Local Register

2.5%* 

Square

2.75% 

PayPal

2.7% 

Sources: Amazon.com, PayPal, & Square

However, the above table doesn't even fully convey how aggressively Amazon is attempting to steal customers away from the competition. Users that sign up for its Amazon Local Register service before October 31, 2014 will received special discounted pricing of only 1.75% until the end of 2015; a serious deal-sweetener. Make no mistake, this is a plain and simply land grab tactic on Amazon's part, and one that seems likely to work.

Bolstering the big picture
Establishing a presence in the emerging growth market for mobile payments alone is likely to have an accretive effect on Amazon's overall financial performance. However, for all the isolated benefits Amazon Local Register should provide, the overall network effect it should afford Amazon's broader e-commerce business is the true victory for Amazon and its shareholders.

Although its by no means a perfect comparison, the economics of eBay's (NASDAQ: EBAY  ) PayPal help shed more light on why a payment service makes so much sense for an e-commerce giant like Amazon. Per eBay's 2013 10-K, PayPal produced an enviable operating margin of roughly 24% last year, versus Amazon's razor thin 1% operating margin in that same period. 

This gets at the two-fold benefits that a product or service like Amazon Local Register present. For starters, it should help incrementally drive more usage of Amazon's e-commerce platform as merchants buy and sell goods and have those orders fulfilled through Amazon's increasingly powerful third-party fulfillment business. I see this as the more marginal of the two benefits, full disclosure.

In my eyes, the vastly more impactful benefit of Amazon Local Register is that it will provide yet another high-margin revenue stream that can help buoy Amazon's other low or even negative margin businesses, most notably its core e-commerce platform. Amazon's famous for using higher margin businesses, such as its Amazon Web Services, to help support its constant push to offer users the lowest prices through its online marketplace. And even though Amazon clearly plans to compete aggressively on price with Local Register, thereby diminishing its cushy margins to an extent, there's little question that moving into this highly lucrative space will provide some new degree of financial flexibility for other money-losing areas in Amazon's corporate folds.

While this story is still unfolding, it appears that Amazon has a winner on its hands with its Amazon Local Register product.

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