Groupon battles Square, PayPal with new mobile payments platform

Groupon is rolling out a new mobile payments processing platform that promises lower merchant costs than rival efforts from Square and PayPal.

GrouponPayments works by accepting credit and debit card transactions via a small dongle that plugs into an iOS device's audio jack.

The nationwide launch of GrouponPayments, built into the latest version of the Groupon Merchants application for Apple's (NASDAQ:AAPL) iPhone and iPod touch, follows a springtime pilot across the San Francisco area. Any U.S. merchant that runs a Groupon deal can now accept credit and debit payments by swiping the customer's card through a small dongle that plugs into their iOS device's audio jack--retailers and restaurateurs can also leverage the app to scan and redeem Groupon offers, add tips, apply taxes, process refunds and email customer receipts.

GrouponPayments claims 1.8 percent plus $0.15 of each MasterCard, Visa and Discover transaction, and 3 percent/$0.15 of each American Express transaction, with no hidden costs or monthly fees. In addition, non-Groupon merchants can process payments at a rate of 2.2 percent (3 percent for AmEx) and $0.15. By comparison, Square offers merchants the choice between a 2.75 percent per-transaction fee or a flat $275 monthly charge, with no processing fee or additional costs, while PayPal Here charges businesses a flat rate of 2.7 percent per credit card or PayPal transaction.

Groupon presents daily bargains from retailers and restaurants in 48 countries worldwide. Mobile devices now account for one-third of Groupon's North American transactions, up 35 percent year-over-year--in May, founder and CEO Andrew Mason told investors that Groupon mobile shoppers spend about twice as much as their desktop counterparts. Independent analyst Rocky Agrawal, an outspoken Groupon critic, praised the company's move into mobile payment processing, telling Reuters that GrouponPayments "fills some of the holes in Square's model. Nice job."

Groupon nevertheless faces an uphill battle against Square and PayPal. As of June 2012, more than 2 million businesses and individuals across the U.S. are using the Square service, up from 1 million just six months earlier--this week, the startup said it is now processing more than $8 billion in payments on an annualized basis, compared to $1 billion just a year ago. In addition, more than 300,000 merchants in the U.S. and Hong Kong have signed up for PayPal Here since the service launched this past March, with PayPal on pace to handle a combined $10 billion in payment transactions this year across all of its mobile initiatives.

For more:
- read this release
- read this Reuters article

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