Groupon Starts Dealing With Mobile Payments

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Groupon (NASDAQ:GRPN), the biggest daily deals website, confirmed that is has launched a new payment service to allow businesses easy access to run credit cards. The move into the quickly growing market sent shares surging on Wednesday.

The new service is called Groupon Payments and is available in the United States starting today. It will allow merchants to accept credit cards by a swipe through a device attached to an Apple (NASDAQ:AAPL) iPhone or iPod touch. The card reader will also be used by consumers to leave a tip, sign for a receipt by fingertip and enter their email address to receive the receipt electronically. Mihir Shah, Groupon’s VP of Mobile and Merchant Products, confirmed the launch and details to AllThingsD.

He said the new service is targeting existing “Groupon merchants, who are running a brick and mortar restaurant business, like a restaurant or spa, and have already been accepting credit cards for a long time and have high volumes. The thing that comes up again and again is credit card processing, and we think they are paying too much.”

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Price is a large focus on the payments service. Groupon claims to have the cheapest rates and will beat a merchant’s current rate if it does not. The company is charging swipes from MasterCard (NYSE:MA), Visa (NYSE:V) and Discover (NYSE:DFS) at 1.8 percent plus 15 cents for each transaction. American Express (NYSE:AXP) will be at 3 percent plus 15 cents per transaction. There will be no hidden costs or monthly fees, and merchants will have their credit card deposits in their bank accounts overnight. This is faster than the typical two to three day wait offered by most credit card processors, according to Groupon’s press release.

Groupon will also offer customer support over the phone everyday of the week and hopes to differentiate itself from competitors through other benefits to merchants. An online Payments Center will allow merchants to check daily sales reports, view a live transaction history, track deposits to their account and analyze revenue trends.

Square, the mobile payments start-up led by Twitter co-founder Jack Dorsey, recently brought attention to the industry when Starbucks (NASDAQ:SBUX) announced a $25 million investment in the company last month. Earlier this week, Square completed a fourth round of funding, which valued the company at $3.25 billion. It is on pace to post $8 billion in transactions this year. Ebay’s (NASDAQ:EBAY) PayPal unit also offers a mobile payment solution via a plug-in card reader.

Although there is already heavy competition, investors are pleased with Groupon’s latest plan to earn additional revenue. Shares of the Chicago-based company surged more than 8 percent to hit an intra-day high of $5.17. However, shares are still down 75 percent year-to-date.

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