Groupon Inc(NASDAQ:GRPN) on Wednesday launched "Groupon Payments" as Groupon is making a big move into a new business - mobile payments.
The deal-a-day company, whose stock has plummeted over 80 percent since its November 2011 IPO, is getting into a crowded business. With Wednesday's announcement Groupon is taking on established players like American Express, plus successful startups like Square, which Visa backs, along with PayPal and Google, which are also getting into the mobile payments space.
Groupon says it accepts "all credit card payments at a lower rate than other providers." Groupon Payments allows merchants to swipe credit cards - not just for Groupon payments, but for any credit card transaction. This is an extension of the company's "Merchants" app for small businesses to manage Groupon deals on Apple iPhones or iPod touches. A credit card swiper, similar to Square's dongle, attaches to accept payments.
Groupon's system costs merchants 15 cents per swipe, plus fees - 1.8 percent for MasterCard, Visa, and Discover cards, 3 percent for American Express. In contrast, Square charges a flat 2.75 percent fee of each swipe, a comparative break down.
In comparison to two- to-three days as most credit card companies takes Groupon also plans to lure merchants by processing payments overnight. Plus, businesses get analytics on their transactions.
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And Groupon clearly isn't just doing this for the fee - especially if it plans to undercut all rivals on price. As it delivers merchants analysis of their transactions, Groupon gets details of how consumers shop.
The company tells us that they tested the service with some 150 San Francisco Bay Area merchants in May. The mobile payments idea resonates with some comments he made in a letter to shareholders on May 7, CEO Andrew Mason writing that he wants Groupon to become the "operating system for local commerce."
The company has clearly invested a lot in developing the technology, and it'll have to invest to market it to merchants.
But the question is whether Groupon is jumping into a new arena where there are many experienced, deep-pocketed rivals. In interaction with merchants for some of their deals, Mason convinces them to go with Groupon for all transactions? Are merchants satisfied enough with the Groupon experience for it to draw that kind of committed user base?
Investors seem convinced that Mason needs to take some drastic steps to turn things around as based on Groupon's precipitous slide.
Shares of GRPN soared 8% to $5.05 in heavy trading at mid day on Wednesday.