Groupon is reportedly testing out its own Square rival, a mobile payments system for merchants that will undercut Square and other competitors’ transaction fees, according to a report by Rocky Agrawal at VentureBeat. Agrawal said he’s heard from a business that has been approached by Groupon about the payments system that would work with iOS devices. That system, apparently already being tested in the Bay Area, would offer a 1.8 percent transaction fee plus a 15¢ per transaction charge. That would be, in many cases, cheaper than Square, which has a flat 2.75 percent transaction fee, and PayPal Here and VeriFone’s SAIL, which have 2.7 percent transaction fees.
The report is interesting, and we’ll have to see if the tests lead to a widespread product. It could put more pressure on existing payments players and potentially cut into the growth prospects of Square and others if it can find traction. Groupon is reportedly offering merchants a free iPod Touch, not just a credit-card reader, to process transactions.