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Just as payments executives were preparing to plunge into the Memorial Day holiday weekend, reports emerged that Groupon Inc. is testing a mobile-acceptance application in and around San Francisco. The reports, which are based in part on a solicitation received via e-mail by a merchant, indicate that the Chicago-based daily-deal site is getting ready to enter what has rapidly become a crowded field already served by companies like Intuit Inc., PayPal Inc., Square Inc., and VeriFone Systems Inc.
News of the mobile-payments pilot comes two months after Groupon acquired FeeFighters, a Chicago-based service that matches small merchants with transaction processors and also operates a transaction gateway known as Samurai. A Groupon spokesperson refuses to comment specifically on the reports. “We're constantly testing new products and services among a diverse group of merchants,” she said. “We have nothing to announce.”
The technology news service VentureBeat reported late Thursday that Groupon, known for sending out millions of half-off offers every day on behalf of local businesses, has started a mobile-acceptance pilot in the Bay area but doesn’t say how many merchants are involved. The report, which cites the solicitation e-mail as well as a “Groupon insider,” says Groupon is undercutting rivals’ pricing by charging 1.8% plus 15 cents per transaction, with pricing for American Express Co. transactions set at 2.7%.
A report on Friday from Bloomberg News, however, says pricing for the service has not yet been determined. The report, which cites a source “with knowledge of the matter,” says “dozens” of merchants are involved in the pilot.
Merchants are using a card reader made by Infinite Peripherals Inc., an Arlington Heights, Ill.-based company, according to the Bloomberg story. The dongle connects to a smart phone via the device’s audio jack, a method first deployed by Square when it launched in 2010. So far, the readers work with iPod touches and iPhones, both products of Apple Inc., the report says.
Groupon may see an opportunity to serve clients for whom it distributes daily-deal offers. Processing mobile transactions could allow the company to gather enough data to more precisely target its electronic coupons on behalf of those businesses. But it is entering a field that is being well plowed. Since Intuit introduced its GoPayment mobile-acceptance service in 2009, the market has attracted a raft of players from the technology and processing sectors of the payments business. Square has already attracted 1.2 million merchants for its service, which has benefited from the publicity generated by its co-founding by Twitter entrepreneur Jack Dorsey. Recent entrants include PayPal and VeriFone, whose services are called Here and Sail, respectively. PayPal Here, introduced only in March, had already signed 200,000 merchants a month later.
If the VentureBeat report about Groupon’s pricing proves accurate, however, the daily-deal giant is selling its new service at a steep discount to its competitors’ offerings. Square’s pricing for a swiped transaction is 2.75%, while PayPal charges 2.7%. Neither upcharges for AmEx. GoPayment’s pricing is similar, though merchants that pay a $12.95 per month fee get a 1.7% swipe rate (pricing for all of these services is considerably higher for keyed transactions). VeriFone’s Sail service has a 1.95% rate for a swiped transaction for merchants that pay a $9.95 fee per month. Like Groupon, Sail upcharges for AmEx, levying a 2.95% rate.
Mobile acceptance appeals to tradesmen, truck drivers, and others with a need to process card transactions at remote locations, but it has also been adopted by small fixed-location merchants and so-called occasional sellers, or persons who sell door-to-door or at flea markets. The latter sellers typically lack a merchant account, so they piggy-back on the service provider’s account.
