Groupon Enters Mobile Payments Battle Looking to Gain Customer Data and Insight

Square seems to be doing really well lately. So why not do what they do, but cheaper? That seems to be exactly what Groupon's latest venture, Groupon Payments, the company's first foray into mobile payments, seems to be at first glance. Embedded in the Groupon Merchants app for the iPhone and iPod Touch that allows small businesses to accept Groupons, the payments system will allow merchants to process credit card transactions using a card swiper designed for the Apple devices, similar to Square's card reader.

Only Groupon will charge less for the service. Square usually charges a flat rate of 2.75 percent for each transaction, although it also recently began offering a monthly pricing plan for its users. Merchants who use Groupon Payments will be charged 15 cents for each swipe plus card company fees (three percent for American Express, and 1.8 percent for Visa, MasterCard and Discover). Groupon also promises to process transactions overnight, instead of the two-to-three business days most card companies take.

The real benefit for Groupon might not be in the fees it collects, as its charging the lowest in the industry. It's hard to see them diving into the mobile payments fight with players like PayPal and Google just to grab those low fees. The big bonus for them might be in the data, as CNBC noted today. Groupon will deliver payments anaytics to its merchant users through an online data center. From the data it analyzes for its merchants Groupon will be able to gain a better understanding of customers' spending habits and be able to deliver more personalized coupons than it can today through daily email blasts.

A few companies presenting at last week's Finovate conference - such as Cardlytics and Truaxis - in New York City were focused on this same principle of analyzing data to deliver personalized rewards to customers. There was a lot of talk about how the daily deals companies like Groupon and LivingSocial were about to fall off a cliff. The ability to deliver rewards the customer actually wants would make obsolete the strategy of filling up their email inbox with advertisements that may or may not interest the customer. The dramatic decline in the value of Groupon's stock since it's IPO last year - a drop-off of more than 80 percent - seems to confirm that the daily deal giant has to change its ways. And Groupon seems to be betting that data and analytics are the key to making that change successful.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio