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Credit Card Applications » News » Other » Groupon to PayPal and Square: Look Out

Groupon to PayPal and Square: Look Out

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Groupon to PayPal and Square: Look Out

Hot on the heels of PayPal`s March announcement of a mobile credit card reader, called PayPal Here, anonymous sources say that Groupon, the hugely popular daily deal website, is manufacturing its own credit card reader designed to be used exclusively by businesses that they work with.

A spokesman for Groupon, Paul Taaffe, declined to comment specifically on the report of a credit card reader in response to media inquires, but said that “Groupon has a number of trials in markets that are designed to help merchants and small businesses.”

The source says that the reader is manufactured by Infinite Peripherals, Inc. and will plug into the headphone jack of any smartphone, just the way card readers from Square and PayPal do. The device is reportedly being tested by small merchants throughout the San Francisco Bay area, the hotspot of mobile technology.

Who Can Use It?

Unlike Square and PayPal Here, which can be used by anyone, the rumor is that Groupon`s device will be for use specifically by merchants offering deals from Groupon. Since any business is able to offer a deal through Groupon, however, it`s unclear how that boundary might work. And in fact, since Groupon won`t comment on whether or not they are actually even manufacturing the device, anything said by any media outlet at this point is pure speculation.

What`s the Takeaway?

Any card reader takes a percentage of the sale – how much will Groupon take? The anonymous source says that Groupon is taking something less than three percent on each transaction, which is in line with PayPal`s 2.7 percent fee for any transaction. Square takes 2.75 percent per transaction if it`s made by swiping the card, or 3.5 percent plus 15 cents if the card number is keyed in. The transaction fee from the credit card issuer is built into this fee.

Consumer Response

Offering its own card reader would be one way for Groupon to up its profits, but that will depend on whether merchants go for its card reader – something that will depend on reliability, ease of use, and marketing. So far, people seem to be quite loyal to Square, which was the first of this type of mobile card reader to be introduced, back in 2010 by Jack Dorsey. PayPal`s Here device, though not yet available, has been the subject of some derision by online technology commentators.

Reaction to PayPal Here from the online technology magazine

  • “This strikes me as being a bit old-fashioned. There are far better mobile payment mechanisms appearing now.”
  • “This idea is clearly stolen from Square. I hope Square had a patent, sues and wins.”
  • “Ever since it went live in October 2010, Square has been the undisputed champion of the industry and the best its competitors could hope for was to keep up with its pace.”

Clearly, people in the tech field have strong feelings about this. With Square perceived to be the first and the best innovator in the field, Groupon has its work cut out for it proving itself, if they are indeed coming out with this technology.

A Geometric Question

If Groupon really is making their own credit card reading device, they may be simply deciding what shape to make it. With the Square card reader in the shape of (what else?) a square, and the PayPal Here reader in the shape of a triangle, Groupon may want to go with something entirely different – but what? A coupon is the shape of a rectangle – makes sense to me. Just a suggestion, Groupon!

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