Wall Street likes it, at least a little. But the real question has to be: Will anyone actually notice that Groupon has announced plans to enter the payments market?
After last month's announcement, Groupon's stock edged upwards and that at least seemed to halt the slide towards financial oblivion. By Groupon's standards, it's been relatively stable ever since.
But can Groupon in fact go belly-to-belly at retail points of sale with far better-established competitors such as Square and PayPal? And the bigger question: Has Groupon launched what will become a price war among card processors that could result in slashed merchant fees?
There's lots of skepticism on both fronts about Groupon's staying power -- and at least one industry player burst out laughing when asked if it represented a serious threat to established payments companies (more on that near the bottom) -- but the fact is, Groupon's transaction fee pricing cuts at least has people buzzing.
Groupon has declared that its fee for processing Visa and MasterCard swiped transactions will be 1.8 percent plus 15 cents per transaction. Square, by contrast, charges 2.75 percent per swipe, or alternatively, it now offers small businesses an option of paying a flat $275 per month with no per swipe fees.
PayPal charges 2.7 percent flat fee on in person, swiped transactions.
Either way, Groupon is cheaper -- their pricing might even be "a loss leader," speculated Brian Day, an executive with Des Moines, Iowa-based The Members Group, which specializes in card processing technologies.
"Apparently, Groupon believes its core customers have real problems with traditional card processors," added Day, who stressed that an advantage Groupon brings to the sector is a large, energetic sales force that already has feet on the street peddling daily deals to brick and mortar merchants. For those reps, it's a win to have another product -- card processing -- to sell to merchants, almost all of whom have existing card relationships but who, it seems, also have gripes over fees and settlement delays.
By promising discounted fees and quick settlements, Groupon may be pressing the right buttons for its small, independent businesses. Groupon said in its press release: "Merchants will also have their credit card deposits in their bank accounts overnight, which is much faster than the typical experience of waiting two to three business days offered by most credit card processors."
Steve Ledford, a payments expert with consulting firm Novantas, agreed that Groupon has fingered a pain point for small merchants: "Many find it difficult to predict what their card processing fees will be. That is what Groupon is targeting."
Ledford quickly added: "...as is Square" -- meaning Groupon did not get there first.
That said, Greg Hammermaster, president of Sage Payments Solutions, noted in an interview: "Groupon has a challenge to overcome. It is hard to say, we are a couponing company but trust us as a financial services provider."
Hammermaster, admittedly, has a dog in this fight -- his operation falls on the traditional side of payments processors versus the newcomers like Groupon and Square. But his observation has merit. It is one thing to do a flash deal with Groupon. It's entirely otherwise to, in effect, trust them with the cash register.
How to do it?
Left unexplained by Groupon -- which had not responded to a list of emailed questions -- is exactly how will the company in fact process payments? Will it build out internal resources from scratch, or attempt to outsource much of the heavy lifting to established players? Nobody who knows is talking and a fact is that this vagueness leaves at least some third-party experts scratching their heads.
Which brings us to the uproarious laughter, which poured from the mouth of Leo Rocco, founder and CEO of GoPago, a cloud-based payments scheme that's won substantial backing from JPMorgan Chase.
"Groupon has no idea what it's doing in payments. None," he said. "Their offering is an embarrassment. Square has already done all Groupon says they will do. They should be helping their brick and mortar merchants, but they aren't."
Bottomline per Rocco: Groupon Payments is a Hail Mary aimed at propping up a flagging deals business that, suddenly, has more competitors than anyone can count.
And that is not anything a merchant truly needs.
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