Better known for coupons than credit cards, internet discount company Groupon announced a new service to process mobile payments. The company says it will seek to develop a system that charges the "lowest rates in today's marketplace".
Groupon will launch with an audio jack card reader similar to current Apple products. The phone jack product is free - allowing merchants to start using the service with no out of pocket costs. For customers who want a stepped up product in the form of a full iPhone or iPad case, the company sells a $100 kit.
Groupon will primarily target MasterCard, Visa, and Discover processing, which all have lower fees than American Express. Swiped transactions of cards sponsored by the three least expensive networks will be charged 1.8 percent plus $.15 per transaction. American Express card swipes come with higher fees – 3 percent plus the same flat rate $.15 charge per transaction.
Swiping is the least expensive processing method. Those who key-in credit card numbers will pay 2.3% plus $.15 for Visa, MasterCard and Discover and 3.5 percent plus $.15 for American Express. Those who do not use Groupon’s current services will pay higher rates for the credit card processing program. Analysts expect Groupon to use its new payment processing service as a way to attract companies to its bread and butter business of selling deeply discounted coupons online.
Groupon has the lowest fees when one considers the differences between the four major credit card networks. However, for high volume processors, Intuit’s GoPayment service is cheaper, but comes at a flat monthly cost of $13 to obtain the lowest processing fees.
Now that the race for mobile payment processing is in full force, it will be up to the processors to sell businesses on their credit processing abilities. Groupon believes that its established relationships with retailers and small local businesses will give it the marketing edge in reaching out to businesses that are too small for commercial banks but too large to ignore credit card processing.