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Groupon Said to Test Card Reader Challenging EBay’s PayPal

Groupon Inc., the largest daily coupon website, is testing a credit card-reader for merchants that could vie with similar devices offered by Square Inc. and EBay’s PayPal Inc., a person with knowledge of the matter said.

The reader, manufactured by Infinite Peripherals Inc., is designed for the businesses that rely on Groupon (GRPN) to market their wares, said the person, who requested anonymity because the test hasn’t been made public. The device plugs into the headphone jack of a smartphone, and it’s being tested by dozens of merchants in the San Francisco Bay Area, this person said.

Groupon collects a fee of less than 3 percent on each transaction through the readers, the person said. The device is part of the company’s efforts to increase revenue from the local shops and restaurants that use its online coupons. The company last year introduced Groupon Now, a service that lets users download coupons instantly to mobile phones.

“Groupon has a number of trials in markets that are designed to help merchants and small businesses,” said Paul Taaffe, a spokesman for Chicago-based Groupon. He declined to comment specifically on a credit-card reader trial.

By entering the mobile-payment processing market, Groupon pits itself against Square, Intuit Inc. (INTU), VeriFone Systems Inc. (PAY) and PayPal, which introduced a credit-card reader in March.

Groupon climbed 1.4 percent to $12.05 at the close in New York. It dropped 42 percent this year before today.

Grappling With Square

Groupon hasn’t made a final decision on the fee it will charge merchants, the person said. Readers offered by Square Inc. charge 2.75 percent per transaction, while PayPal recently introduced a tool that carries a 2.7 percent fee.

The readers tested by Groupon work with Apple Inc. iPhones and iPod Touches and connect to software partly designed by FeeFighters, acquired by Groupon this year, the person said.

Representatives of Infinite Peripherals, which has offices in Arlington Heights, Illinois, and Irvine, California, didn’t immediately respond to messages after regular business hours.

Groupon now generates most of its sales by selling discounts known as Groupons from businesses such as restaurants and nail salons. It splits the revenue with the businesses.

The technology blog VentureBeat reported yesterday that Groupon was testing a credit-card reader for merchants.

To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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