Groupon Launches a New Payment Service

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Groupon Launches a New Payment Service
Groupon, “a website that features discounted gift certificates usable at local or national companies, launched a state of the art payment service, which allows businesses to accept credit cards using an iPhone or iPod touch” (Ortutay 1). Following the announcement, Groupon’s stock rose by 14 percent and its shares increased by 65 cents. The invention significantly boosted the company’s market image, and it shook many of its competitors such as LivingSocial.com and Amazon.com. This payment system will also “allow merchants swipe credit cards on their phones using a small card reader attachment” (Ortutay 1). Groupon invented this payment system so as to assist small sized businesses accept credit card payments. Many small businesses shy away from using credit card payments due to high transaction fees.
Groupon aims at exploiting the proliferation of smart phones in the US market. As such, merchants who will swipe credit cards issued from Visa, Discover, or MasterCard, will be charged 1.8 per cent fee and 15 cents per transaction. On the other hand, merchants who will use American Express cards will be charged a 3 percent fee and 15 cents. The payment service launched by Groupon seems to be cheaper than other existing services. For example, merchants who use Square are charged 2.75 per cent per swipe, or a monthly fee of $ 275; merchants who use PayPal are charged 2.7 per cent per swipe. In practical terms, a credit card transaction involving $ 1000 will be reflected as follows: $ 18.15 for Groupon, $ 27.65 for Square, $ 27.15 for PayPal, and $ 30.15 for American Express. This shows that Groupon’s payment service is cheaper than the other service providers except when the transaction involves American Express credit cards.
Retailers and Sellers ought to compare the potential charges from these service providers before adopting credit card payments. It is profitable to use credit card payments because it attracts more customers. The payment service launched by Groupon aims at reducing payment processing time by allowing overnight p...