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Groupon Launches Credit Card Payment Business

Wednesday, 19 September 2012 12:30 PM

Groupon Inc. launched a credit card payment business on Wednesday, entering a crowded field to compete with eBay Inc.'s PayPal and start-up Square Inc.

Groupon said the new service lets restaurants, salons and spas, retailers and other local businesses accept credit card payments at a lower rate than other providers.

Any merchant that runs a daily deal with Groupon in the United States can sign up for the payments service, the company added.

Groupon will charge 1.8 percent for MasterCard, Visa and Discover cards, on top of a 15 cent fee per swipe. For American Express cards, it charges 3 percent plus the 15 cent fee.

Groupon is the world's largest daily deal company, offering discounts on local services. However, Chief Executive Andrew Mason and Chief Financial Officer Jason Child have grander plans for the company to become the "operating system" for local commerce, as Mason put it earlier this year.

While Groupon's goals have been met with skepticism by Wall Street analysts, the company has rolled out a slew of new services for local merchants, including a scheduling system, a customer-loyalty program and now payments.

The payments service may be designed to encourage merchants to run Groupon deals and use the company's other services. Merchants that don't run Groupon deals will be charged a higher rate of 2.2 percent to accept MasterCard, Visa and Discover, plus the 15 cent fee.

"They're not looking to make a lot of money from this," said Sameet Sinha, an analyst at B. Riley & Company. "The most important thing is that Groupon will get more data on how many customers bought deals, when they came into stores and how much they spent."

The payments business may also help Groupon attract more merchants cheaply, the analyst added. Groupon already has thousands of merchants in its databases and the company's massive sales force can offer the payments service to merchants while they are arranging daily deals, Sinha explained.

Groupon shares rose 6.9 percent to $5.01 at midday. The stock has lost about three-quarters of its value since the company went public last year.

The payments business has become crowded in recent years. Square, a start-up backed by Twitter co-founder Jack Dorsey, has won small merchants as customers by offering easy credit card acceptance through a small swipe device that plugs into smartphones.

PayPal launched a rival service earlier this year called PayPal Here.

PayPal's service charges a fee of 2.7 percent of the purchase price for all types of credit and debit cards - including those issued by American Express. Transaction fees for processing AmEx cards are often higher. Square charges 2.75 percent per swipe.

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Groupon Inc. launched a credit card payment business on Wednesday, entering a crowded field to compete with eBay Inc.'s PayPal and start-up Square Inc.
Wednesday, 19 September 2012 12:30 PM
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