) recently announced its entry into the mobile payments market with
the launch of Groupon Payments - a service that enables businesses
to accept credit cards via
) iPhone or iPod Touch.
Although the company is capable of processing the transactions
of any credit card, it is currently focusing only on businesses
that offer deals through Groupon. It is also allowing other
businesses to use the payment service under a test program, but is
charging premium rates for it.
The target clientele is small businesses that do not accept
credit cards to either avoid paying high transaction fees or due to
lack of access to the required technology. Now they will be able to
overcome these problems with Groupon Payments, which will benefit
from the growing use of smartphones. The company has tested the
technology in the San Francisco Bay Area.
However, Groupon will face tough competition from
) PayPal and Jack Dorsey-owned Square, both of which offer credit
card usage via smartphones by means of a card-reader attachment.
However, the company will have an advantage in terms of processing
speed since it aims to process transactions overnight, compared to
other companies that take as long as three days.
Groupon will also have benefit in terms of pricing as it is
charging substantially less than the competitors. PayPal charges
2.7% fee, while Square charges 2.75% or $275 per month. Meanwhile,
Groupon will charge only 1.8% fee plus 15 cents for each swipe
using a card issued by
Discover Financial Services
). However, it will charge 3% plus 15 cents for every transaction
American Express Company
) cards, which is higher compared to peers.
Groupon is launching the service to widen its product portfolio
and increase its prominence among customers who have too many
options to choose from. Competitors, such as LivingSocial and
), are attracting customers by offering discounts and deals. Thus,
the new service will offer Groupon an additional source of revenue
and help in attracting more customers.
The announcement raised investor confidence in the stock and
share price surged 35 cents or 13.9% to close at $5.34 on
Wednesday. This comes as marginal respite to Groupon, which is
dealing with plummeting share prices since its IPO of $20 per share
in November last year.
Groupon currently carries a short-term Zacks #3 Rank (Hold).
APPLE INC (AAPL): Free Stock Analysis Report
AMAZON.COM INC (AMZN): Free Stock Analysis
AMER EXPRESS CO (AXP): Free Stock Analysis
DISCOVER FIN SV (DFS): Free Stock Analysis
EBAY INC (EBAY): Free Stock Analysis Report
GROUPON INC (GRPN): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
To read this article on Zacks.com click here.