Square To Get Tough Competition From Groupon & Paypal

Square might have been the first one to develop mobile payment processing for retailers but it will definitely not be the only one this year. Both PayPal and Groupon have jumped on the mobile payment idea and are rolling out their equivalents soon.

PayPal had already announced its PayPal Here offering more than a month ago. Now, the company has made deals with some leading retailers which would allow their customers to pay for the goods they shop for, directly from their mobile phones. Let’s look into what both the companies are working on.


After an underwhelming performance in its IPO, Groupon has been working hard to maintain the its colossal growth and at the same time stabilise the company. Their CEO, Andrew Mason addressed a letter to his stockholders saying that he wants to build Groupon into an ‘Operating System for local commerce’. This part is specially important as Groupon has been rumored to be testing out its Square-like offering right now.

Here are some details that have emerged:

1. The transaction fee is supposedly 1.8% along with a charge of 15 cents per transaction processed through their terminal. In comparison, Square charges 2.75% per transaction and has no extra per transaction fee. Paypal Here charges 2.7% as the transaction fee. Only Groupon has a per transaction fee of 15 cent.

2. Groupon is reportedly offering an iPod Touch and a card reader to their merchants for free! Both PayPal Here and Square give out their card readers for free and nothing else. This is somewhat of an overkill as it forces PayPal Here and Square to think fast to counter this.

3. Groupon’s product is already being used/tested in select areas in San Francisco. So we are looking at this product launching very soon.


The news is that PayPal has struck a deal with 15 leading retail businesses such as Toys R Us, J C Penney and Barnes & Noble. Now their consumers can easily pay for their purchases through their mobile phones. This also lets the company enter into physical retail segments and that is a big business opportunity for the online payment company. Home Depot started accepting PayPal in 2000 of its stores earlier this year. PayPal has also big plans for Asia in the coming months.

The merchants are keen to adopt services like these because they are cheaper and easier than normal credit card transactions. This is also a win-win for PayPal and other online companies because now these services can break the barrier of being online and extend their services to the physical world. This will help these next-gen Internet companies to create a disruption in the process and mechanism of offline payments. The other retailers that PayPal has tied up with are  Office Depot, American Eagle Outfitters, Abercrombie & Fitch, Rooms To Go, Jos. A. Bank, Aeropostale, Foot Locker, Nine West, Jamba Juice, Guitar Center, TigerDirect and Advance Auto Parts. We are wondering when a service like this will hit India. PayPal has never really taken off in India due to the  regulations from the RBI. You can read more about it here.

The mobile transaction services for retailers was started by Square and has now gotten somewhat crowded with every online payment companies getting on to it. Square, the originator of the idea and the product, faces some very tough competition in Groupon and PayPal and it will have to up its game to survive in this rapidly growing field.

What do you feel about the offerings from these companies? Share your views with us.

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