Groupon recently announced that it is testing a payment processing service that will allow merchants to accept credit cards at a much cheaper price than is currently being offered on the market. This will mark the third new major credit card processing company utilizing a smartphone or device in recent months, with the other two being PayPal and Square.
Groupon - who initially began as a discount deal website targeting specific localities - now has far greater plans to expand its reach. Some believe that moves like this by Groupon are a result of an ever increasing amount of competition in Groupon's market and a less than optimal performance after so much hype preceding its IPO.
While not receiving much enthusiasm from banks and lending institutions following their stock fumble, the company is still pursuing a path of diversification that will hopefully bolster company profits in the long run.
While the transactional rates are quite low with Groupon's trial program (1.8% + $0.15), the costs to get setup are much more than with Square or PayPal. The bundled kit comes with an Apple iPod and a device/case that wraps around the unit, allowing you to process payments anywhere you have an internet connection. The downside to this is that companies like Square offer a slightly higher rate (2.75%) but offer a card reader for free and can be done over Wi-Fi or a 3G connection.
The Groupon fee has not yet been finalized and will most likely increase when rolled out to the general public. Groupon has acknowledged that it may "subsidize" a lower rate through other products and services that will be offered alongside the payment processing system. Currently, the reader is being tested in a limited trial in order to work out potential kinks and problems in the system.