Groupon plans to dive into the
small-business credit card
processing business with a mobile reader similar to those from
Square and PayPal, according to news reports. Bloomberg's Douglas
MacMillan reports that a company known for producing credit card
readers for Apple's iPhone and iPod touch has been testing
Groupon's prototype device at independent retailers in the San
Francisco Bay Area.
Groupon has responded to critics of its "daily deals" business
model by launching a suite of small business and promotional tools.
Groupon's latest mobile app includes a live map that updates users
with currently available, local promotions. The company also
launched an online calendar that lets service providers schedule
their voucher redemptions and other services at no charge. A
Groupon
credit card
processing service would enable participating merchants to merge
their voucher transactions with other payments, reducing accounting
and terminal costs.
New competition for Square and PayPal
Though details of Groupon's service remain sketchy, Bloomberg's
source suggests that the company plans to compete against
entry-level merchant processing services that charge a fixed
percentage for debit and credit card transactions. Square has
expanded its credit card processing service to include free
point-of-sale software, while PayPal now supplements its online
payment system with a free magnetic card reader. Both services
charge up to 2.75 percent of each sale, with access to funds as
soon as the next business morning.
Researchers from the Yankee Group, a research and advisory firm
in Boston, estimate that mobile credit card transactions will grow
to a $1 trillion market by 2015, especially as many traditional
merchants transition from fixed point-of-sale systems to mobile
devices. Like similar devices from Square and PayPal, Groupon's
rumored credit card reader will use existing smartphones and
tablets running operating systems from Apple and Google.
Despite charging higher percentage fees for many swiped
transactions than for many traditional merchant accounts, mobile
credit card payment services eliminate costly equipment leases and
monthly service fees imposed by most processors. In addition, many
small merchants typically spend less to process
American Express
cards through Square or Paypal than through standard merchant
accounts, overcoming objections that the travel services company's
interchange fees have become too high for some companies to
justify.