A new service offered by Groupon Payments offers sweet deals for merchants. The company announced few weeks ago that merchants who take advantage of their new service will receive credit card discounts. This move is a step into territory currently enjoyed Square and PayPal.
Deals for merchants:
- 1.8% swipe fee plus $0.15 for each transaction for MasterCard, Visa and Discover purchases
- 3% plus $0.15 for American Express purchases
- Option of using the iPhone-attached swiper for credit card purchases (a free version available for use with your audio jack, another for $100 is built into the phone’s casing)
- Merchants who run at least one Groupon deal are eligible for the service
How does this deal compare to others?
Square, another popular payment service, offers a 2.75%-per-swipe fee. Groupon’s 1.8% is a welcomed lower rate. Of course, those companies who handle large numbers of credit card transactions can opt to pay Square’s $275 flat monthly fee.
Paypal charges 2.7% for each transaction, but also offers merchants an option to ear 1% back on MasterCard purchases, bringing the overall resulting fee to 1.7%, slightly below Groupon’s offer.
The marketing strategy
Groupon’s VP and general manager for payments, Gene Alston, says the company does not intend to battle for Square’s market focus. Instead of aiming for companies that don’t have a means to process credit cards, Groupon is focusing on merchants who already have this access who might be seeking ways to get discounts. Alston explains, “What we found is they’re looking to make that [credit card processing] experience better.”
These changes were discussed in a July edition of Business Week that profiled the company. Groupon’s CEO, Andrew Mason, explained that this “operating system for local commerce” aims to place Groupon in the center of small business transactions. A tough competitor for the company may be Paypal, a former employer of Alston. PayPal’s overall lower fees don’t seem to intimidate Groupon. Alston says that merchants typically get their credit card accounts through a bank. These customers may not see PayPal’s offer as a true cut in fees, and they may experience saving more money taking advantage of Groupon’s offer.