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Groupon introduces mobile payments system

Online coupon broker Groupon debuted a new payments system on Wednesday meant to offer the "lowest rates in today's marketplace" to U.S. merchants who use its couponing service.

The new system is like other mobile payments systems; it features a Groupon-branded credit card reader, which attaches to an iPhone or an iPod Touch via the audio jack. Merchants can accept credit and debit cards by swiping them through the card reader, or they can key in the transactions on the device's touchscreen, though charged at a higher rate.

Groupon also offers a card-reading phone case, similar to what Apple uses in its retail stores. The audio jack card reader is free, but the phone case costs $100.

What makes Groupon's new service stand out are the rates, the lowest of any payments processor on the market, with a "lowest rate guarantee" available to U.S. merchants. If merchants can provide proof of lower third-party rates for identical services, Groupon says it will lower its rates.

Groupon's rates are as follows:

Swiped transactions for MasterCard, Visa, and Discover will be charged 1.8 percent plus $0.15 per transactions.

Swiped transactions for American Express: 3 percent plus $0.15 per transaction.

Keyed-in transactions for MasterCard, Visa, and Discover: 2.3 percent plus $0.15 per transaction.

Keyed-in transactions for American Express: 3.5 percent plus $0.15 per transaction.

Groupon will also offer its payments system to merchants who don't use its coupons, though at a higher rate. For non-Groupon merchants, swiped transactions will be charged at a rate of 2.2 percent (3 percent for American Express) plus $0.15 percent per transaction.

Compared to other payments systems, Groupon's service -- even for non-Groupon merchants -- is a pretty good deal. However, comparing mobile payments processing systems is difficult.

The main competitor in the mobile payments market, Square, has a very straightforward rate: 2.75 percent per swipe for all credit and debit cards, with no additional fees. If your business does less than $250,000 in transactions per year, you can sign up for a flat rate of $275 per month.

Intuit GoPayment mobile payments processing system also offers two options. With no monthly fee, it charges 2.7 percent for swiped transactions (all cards), and 3.5 percent for keyed-in transactions. However, if you opt to pay a fee of $13/month, the rates go down to 1.7 percent and 2.7 percent, respectively.

PayAnywhere is ever-so-slightly cheaper than Intuit, with all card swipes costing 2.69 percent, and all keyed-in transactions at 3.49 percent. For keyed-in transactions, however, PayAnywhere also charges $0.19 per transaction.

Other mobile payments processors have similar rate plans. As you can see, the best mobile payments processing system to use will depend on how you do your transactions. That said, Groupon's system looks pretty good, so long as the transactions exceed $16 and aren't from American Express cards (Square's swiped transaction charges are better for transactions under $16, because Groupon charges $0.15 per transaction).

Groupon's new payments system will also let merchants get paid faster: overnight, instead of the typical two-to-three-day wait for money. Its supplementary online Payments Center allows merchants to view a transaction history, check sales reports, and track deposits. Plus, a dedicated support team is available by phone and email seven days a week.

The question that remains: Will Groupon merchants forever be able to use Groupon's new payments system at the lower rate, or will the lower rate expire when their Groupon promotion expires? At the time of this posting, Groupon had not responded to a request for comment.

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