Groupon Goes To War With Square

Groupon payments service

Photo: Business Wire

Groupon is rolling out a payments service today, and it appears to be a direct challenge to Square.AllThingsD’s Tricia Duryee reports that the new service will allow merchants to accept credit card payments using a card reader attached to an iPhone or iPodTouch.

In an attempt to save its struggling coupons business and increase revenue, Groupon is looking to become the most affordable mobile payments service.

Groupon charges MasterCard, Visa and Discover swipes at a 1.8% rate plus 15 cents for each transaction done by a Groupon merchant. It charges American Express swipes at a 3% rate plus 15 cents for each transaction.

Square, on the other hand, charges 2.75% per swipe for all major credit cards, while PayPal Here charges 2.7% per swipe.

While Groupon’s payments service is geared towards its merchants, non-Groupon merchants can still use the service at a rate of 2.2% per swipe plus 15 cents for every transaction. It’s more expensive than Groupon’s rates for merchants, but still cheaper than Square’s.

Keyed-in transactions for MasterCard, Visa and Discover are 2.3% plus 15 cents, and 3.5% plus 15 cents for American Express.

Square closed a $200 million round earlier this week with a valuation of $3.25 billion, while Groupon is currently valued at around $3.07 billion.

Groupon shares are up 7.61% this morning, trading at $5.05.

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