Groupon is testing a payments offering to compete with Square and PayPal
Groupon is testing out an offering of its own in the increasingly crowded payments space, according to an email I was forwarded by a business that was solicited for the service. (Disclosure: I have various puts against Groupon.)
Context & Ripple Effects
This test is the third leg of a platform push Groupon has been assembling since early March: the Scheduler beta moved the company toward always-on merchant tools, and the FeeFighters acquisition brought in comparison-shopping technology for business services — exactly the muscle a payments product needs to price against incumbents.
The move lands in a market heating up from both sides: GigaOM reported in mid-March that PayPal was preparing its own Square competitor, and Square's payment volume was already up 25% since March per the relationship data. For Groupon, though, the timing is delicate — the April financial-results revision forced CEO Andrew Mason to publicly warn against 'stupid risks,' and the pickup of this story by Bloomberg, Business Insider, GigaOM and others shows how closely the market is reading every new bet.
First-order effects
- The businesses being solicited get a direct alternative to Square and PayPal hardware-and-fee packages, with Groupon leveraging its existing merchant relationships rather than winning foot-in-the-door cold.
- Groupon is committing engineering and go-to-market resources to payments while still steadying its finances after the April revision — a second front opened alongside Scheduler under a CEO who had just pledged discipline.
Second-order effects
- Square and PayPal face a competitor whose distribution advantage is a pre-built base of local merchants already running deals through Groupon Now — which hit 1.5 million deals shortly after launch and was outpacing the original platform in volume — making pricing pressure on card-present processing likely.
- If Groupon bundles payments with deal placement or Scheduler, merchant-services pricing stops being a standalone decision for small businesses and becomes part of a marketing-platform bundle.
Third-order effects
- The pattern across these moves suggests daily-deal companies evolving into full local-commerce platforms where deals, scheduling and payments interlock — shifting competitive gravity from customer acquisition toward owning the merchant's entire transaction stack.
- A crowded field of well-funded entrants (Groupon, PayPal, Square) pushing into card-present payments points toward fee compression in small-business processing, with regulation of payment terms potentially following if pricing wars intensify — though whether any single player sustains this remains an open question.
The trend: Consumer-facing internet companies are vertically integrating into merchant payments infrastructure, turning deal platforms and marketplaces into full-stack transaction processors competing head-on with dedicated payments firms.