Groupon Gets Its Mobile Payments Groove On

Groupon is entering the mobile payments space with its own offering, Groupon Payments. The service, which facilitates credit card transactions, is available to any small business in the U.S.; however, it’s offered to Groupon merchants at cheaper rates.

Groupon is positioning the service as easier and less expensive for small businesses to use than traditional payment systems. It is built into the latest version of the Groupon Merchants app for the iPhone and iPod touch.

In addition to lower transactions fees, Groupon also promises to pay its users overnight instead of waiting the standard two or three days for a credit card payment.

Swiped transactions for MasterCard, Visa and Discover are 1.8 percent plus15 US cents per transaction. For American Express, the fee is 3 percent plus 15 cents per transaction.

Non-Groupon merchants pay 2.2 percent plus $0.15 per transaction.

Additional features include a live transaction history via the Groupon Payments Center, daily sales reports, deposit-tracking, and analytics to measure revenue trends. Groupon is providing merchants with an audio jack card-swiping device for free.

Old Systems, High Fees

Merchants are in need of this service, as most are using antiquated systems and paying higher transaction fees, Gene Alston, the vice president and general manager of Groupon Payments, told the E-Commerce Times.

“We saw an opportunity to provide a service to merchants to save a little money and have a better payment experience in general,” he said.

During the pilot project, which was launched in February in San Francisco, merchants appreciated the flat rate pricing and simplicity of the system, according to Alston.

They also liked the application’s visibility into customer purchases, he noted. “The merchant can see, for example, how much a particular customer overspent the Groupon coupon. It can also run a rewards program and have visibility into those metrics.”

In general, “we find merchants that have more visibility into the Groupon deal are happier,” said Alston.

Read the Fine Print

At face value, it sounds like a viable alternative for companies, especially small local businesses — but it would behoove them to read the fine print, Greg Hammermaster, president of Sage Payment Solutions, told the E-Commerce Times.

With alternative services such as these — a group that includes Square and PayPal, Hammermaster said — the business customer is often giving up financial and risk support.

“If you need to fight a legitimate transaction being ‘charged back’ to your merchant account, you may be on your own,” Hammermaster pointed out. “In fact, read the fine print and you may discover that you have signed away your merchant credit card rights, and that your deposits are held for up to 90 days. And, worst case, if your Web/mobile device is hacked and you experience credit card fraud, your troubles have just begun.”

Smart Move Could Be Smarter

This is a smart move for Groupon, said Bala Iyer, a business professor at Babson College.”Groupon is struggling and they need to figure out new ways to add revenue and profitability to their business model. Now, they own several relationships with merchants so why not try to get more of out of those?”

Still, Groupon could be doing more to wring additional profitability from this move, Iyer told the E-Commerce Times.

“If Groupon tries to deepen and broaden the relationship it has with both customers and merchants through this new payment system, then we really have something interesting to talk about,” he said.

For instance, it could leverage the analytics features that mine transaction data for valuable new information about customers. The question Groupon needs to answer for its merchants and for itself, Iyer said, is how are these coupons being used in the lives of the customers, and how Groupon and the merchants can add value to that use.


  • This is a smarter way of going forward since technology has gone to high heights.Accessing mobile payments is one of the best features which can be used in tablets,ipads and smartphones.From now onwards products are within the palm of our hand..great work..

  • Groupon is attempting to grab a piece of Amazon’s and ebay’s shares of the market, which in essence is the correct strategy, the challenge will be the get the brand name on a better light, and will not be an easy challenge

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