Groupon aims to attract more merchants to its mobile payment offering by letting them remove the mobile device from the equation.
To this end, Groupon has begun offering its software and processing services through the payment terminals merchants already use. Until now, merchants that wanted to sign up with Groupon Payments would have to take swiped card payments through a smartphone or tablet.
"Our goal is to make a payments service that is easy to adopt," says Sean Harper, Groupon's director of product. "There are a lot of merchants that aren't ready to use an iPad."
Groupon, which is most well-known for its "daily deals" offering, has had trouble convincing some merchants to use it for payments.
"We tell them about the features of our product and those are all things that the merchant wants," Harper says. "We say, 'OK, fine, then just buy this iPad and throw it on your counter and retrain all your staff and do X and do Y and do Z,' and they say, 'Well wait a second. That's a lot.'"
By supporting hardware from VeriFone and Ingenico, Groupon is able to develop a relationship with merchants that were not ready for a complete overhaul of their payments process, he says.
Merchants using conventional terminals would still have access to Groupon's Web portal for analytics, reporting and other data. While a merchant is accessing the portal, Groupon can "pop up little reminders" to encourage the merchant to adopt Groupon's hardware as well, Harper says.
Merchants could also choose a hybrid approach, using a standard terminal in stores and a Groupon mobile card reader at events, Harper says. Because all payments would go through Groupon, they would all be visible in the Web portal.
In addition to letting merchants use Groupon's software on their existing hardware, Groupon offers a VeriFone vx520 terminal, which it sells for $150 up front or in a rent-to-own model at $15 a month for 12 months. Groupon Payments charges 1.8% plus 15 cents for swiped Visa, MasterCard and Discover card payments. Its American Express rates vary by the type of business.
Groupon still relies on its own sales force to distribute its payment hardware, rather than working with independent sales organizations. The vx520 is provided as a compromise for merchants that prefer a conventional payment terminal but may need to upgrade from a model that is too old to accommodate Groupon's software, Harper says.
Groupon's new offering is also significant for VeriFone's long-term mobile payments strategy, says Aleia Van Dyke, a payments analyst for Javelin Strategy and Research.
"VeriFone had their own mobile dongle that came out last May called Sail and they quickly shuttered it because they said that the margins were too low," she says. "But they assured everybody that they were going to be having their foot in the business."
In supporting a third-party payment terminal, Groupon's strategy runs counter to that of rivals such as Square. In its efforts to appeal to larger merchants, Square has favored its own mobile card reader with offerings such as the "Business in a Box" bundle and a tablet-sized card reader called Square Stand.
Groupon can be more flexible than Square or VeriFone because it is selling more than just payments, Van Dyke says.
"The more relationships with merchants [Groupon] can make, the more they can build up their website" for deals, Van Dyke says. Supporting another company's hardware "might be giving up something but at the same time it's still helping them increase their footprint," she says.
Groupon's Harper says it is inevitable that iPads will take over the point of sale.
"We're going in that direction," Van Dyke says. "It's not the tidal wave that all people think it's going to be but it's definitely happening faster than previous trends."
Groupon launched Groupon Payments in September 2012, offering a mobile card reader that plugs into a phone's headphone jack. Groupon also purchased Breadcrumb last year, giving it a tablet-based point of sale system for merchants to use in stores. Groupon has been steadily improving Breadcrumb with additions such as an offline mode that lets merchants accept payments even if they lose their data connection.