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Groupon targets US credit card payments and PayPal / Square

Online daily consumer deals specialist, Groupon, has launched a US payments business and signalled its intention to compete aggressively on price with eBay’s PayPal and with Square for merchant processing business.

Called Groupon Payments, the new service enables US restaurants, salons and spas, retailers and other businesses that run Groupon daily deals to accept credit card payments at a lower rate than other providers, but only if they are locked into a deal. In a typical local deal, a customer could pay US$20 for a voucher providing US$40 worth of goods and services, seeking extra customers via Groupon’s reach.

Groupon will charge 1.8% for MasterCard, Visa and Discover cards, on top of a 15% fee per swipe. For American Express (Amex) cards it charges 3% plus the 15% fee. Card readers offered by Square currently charge 2.75% per transaction, while PayPal has a 2.7% fee. The deal may not be beneficial in all cases and merchants will have to examine each package offering in detail.

"We talk to a lot of Groupon merchants and the one thing that came up again and again was that they felt like they were paying too much for credit-card processing," said Mihir Shah, vice president of mobile and merchant products at Groupon, when discussing the launch. "[That is why] we set out on this mission to slash the complexity and cost of collecting credit cards.”

"We already have the sales force, we have the distribution advantage, and we have the relationship with the merchant. All we have to do is turn on the service." Shah added, before saying that Groupon is giving away card readers made by Roam Data that plug into the headphone jack of Apple devices to aid take-up.

Merchants using Groupon Payments will be able to analyse transaction history, check daily sales reports and review revenue trends. The group’s daily deals competitors include LivingSocial, Google and Amazon.com, which owns part of LivingSocial. Groupon’s share price has fallen dramatically since its listing, so it could benefit from a new revenue stream if the new service takes off.