Groupon debuts card payments on mobile phones

The company will compete with the likes of Square and PayPal which offer card swiping dongles with mobile phones

Groupon has launched a payment service that allows merchants to use an attachment to a mobile phone to swipe credit cards.

The daily deals site is entering an increasingly competitive market where key players such as PayPal with its PayPal Here, Square, and Intuit already offer similar services built around mobile phone apps and card reader devices.

But Groupon said in a blog post it was backing its new Groupon Payments service with the guarantee of being the lowest cost option for the companys merchants to accept credit cards. Groupon Payments users will also get paid overnight. The service is now available to Groupon merchants in the U.S.

Built into the latest version of the Groupon Merchants app for the iPhone and iPod touch, Groupon Payments provides restaurants, salons and spas, retail establishments and other local businesses with the ability to accept all credit card payments at a lower rate than other providers, the company said on Wednesday.

Groupon's technology, which has been tested in the San Francisco Bay area, is targeted at small merchants who don't have the traditional card swiping equipment.

The new Groupon Merchants app, which lets merchants redeem Groupons and accept credit card payments from the same application, is available on Apple's iTunes store. The feature does not appear to be supported yet on the Groupon Merchants App for Android.

While Groupon Payments is designed for local businesses that run deals with Groupon, the service is also available as a pilot to non-Groupon merchants who will pay slightly higher transaction fees on some cards.

Groupon merchants will be charged a 1.8 percent fee plus $0.15 for each transaction when a card issued by MasterCard, Visa or Discover is swiped. American Express cards will be charged a 3 percent fee plus $0.15.

Accepting card payments isn't the only way Groupon is expanding its business. In March, the company acquired FeeFighters, a comparison engine for payment providers targeted at small businesses.

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