Setting its competition scopes directly on Square, Groupon launched a credit card scanning service that boasts lower fees and an ability to track transaction activity.
The service goes head to head against Square and PayPal.
Dubbed Groupon Payments, the service accepts Visa, MasterCard, Discover, and American Express cards. It offers a free scanner made by Roam Data Inc., as well as a $99 scanner made by Infinite Peripherals Inc with enhanced features. Both scanners utilize web and mobile software to process the payments. The reader is compatible with Apple’s iPhone and iPod Touch. The company has already tested the service among merchants in San Francisco.
“From day one we discovered we could rely on Groupon Payments to effectively, quickly and easily process transactions and deliver a better customer and employee experience,” said Nadia McClinton, owner of Body By X. “It truly saves us time, money and effort that we can invest in other aspects of our operations.”
Existing Groupon customers will pay transaction fees of 1.8 percent plus 15 cents for cards from Visa Inc., MasterCard Inc. and Discover Financial Services, while American Express card owners will pay 3 percent plus 15 cents. Comparatively, Square charges 2.75 percent per transaction, while PayPal charges 2.7 percent.
Businesses that don’t offer Groupon deals will be charged a 2.2 percent fee plus 15 cents per transaction for Visa Inc., MasterCard Inc. and Discover Financial Services, and 3 percent plus 15 cents for American Express.
The company can afford a lower rate because it faces lower costs rolling out a product to merchants it already serves, as well as a large sales staff.
“We already have the sales force, we have the distribution advantage, we have the relationship with the merchant,” Mihir Shah, vice president of mobile and merchant products at Groupon, told Bloomberg. “All we have to do is turn on the service.”
Payments will reportedly be more quickly processed by the next business day, as oppose to the standard two to three day processing time.
Groupon is striving to earn additional revenue streams as its daily deal business struggles with shrinkage in the midst of business client complaints that the deals are more hassle then they’re worth and fail to deliver return business. The company went public in November of 2011 at $20 per share, but has since dropped to $5.27.
The announcement saw of Groupon stock rise 7 percent in early trading on the morning the news broke. Groupon’s website also went down that morning, perhaps due to business interest in the new offering.