Daily deal provider Groupon adds a payment service

Breadcrumb POS uses the iPad instead of a traditional payment device.

Kevin Woodward

Groupon Inc., whose deal vouchers are designed to drive traffic to local stores and restaurants, is offering a tool that could lower payment processing costs for those merchants. Called Breadcrumb POS, the service enables merchants to process their credit and debit card transactions via free software on an iPad. Breadcrumb POS essentially replaces the cash register found in many small shops.

Groupon charges 1.8% plus 15 cents per transaction, almost a full percentage point less than competitors like Square Inc. and Intuit Inc.’s GoPayment, which charge 2.75%, and PayPal Here, 2.7%. Merchants load the Breadcrumb POS software on their own iPads. The software also enables Groupon merchants to redeem vouchers with a single tap.

Other competitors that offer traditional countertop payment terminals may charge higher processing fees than Breadcrumb POS and typically include monthly fees, such as for security or providing a statement. They also require contracts with a minimum length of service. Merchants, such as salons, dance studios and ice cream shops, using Breadcrumb POS pay for the service as they use it and are not locked into a contract. Breadcrumb POS handles security, and merchants can view reports within the software or on a Breadcrumb web site.

Groupon, No. 65 in the Internet Retailer Top 500 guide, is able to offer the low processing rate because it has a built-in base of retailer clients it can sell the service to, says Mihir Shah, Groupon vice president and general manager of merchant OS.

For many payment processing companies, a major cost is the acquisition of new merchant clients. Those costs typically are recouped in the processing fees, Shah says. Groupon has thousands of merchant relationships, Shah says. “We are able to get leads from those relationships,” he says. Groupon would not disclose how many U.S. merchants it works with, but says it has 500,000 merchant relationships worldwide.

Because of those existing relationships, and using the Internet as a distribution method, Groupon is able to acquire merchants at a lower cost than competitors can, Shah says.

In addition to the processing services, merchants using Breadcrumb POS also can view reports such as sales for the day and sales by product.

Breadcrumb POS is just one component of what Groupon calls a local commerce operating system, Shah says. “We started with helping local businesses grow,” he says. “It’s very clear the technology businesses they’re using to run their point-of-sale and payment processing are too expensive for what they are getting.”

Other Groupon payment services include Breadcrumb Pro, a restaurant and bar management system, and Breadcrumb Payments, the payment processing service.

Payment systems tend to cost many thousands of dollars and require extensive employee training. With Breadcrumb POS, employees can easily figure out the software, Groupon says. Additionally, a retailer can update product inventory itself within the app.

Breadcrumb POS is emblematic of an important change in the payment industry, says Allen Weinberg, a consultant at payments consulting firm Glenbrook Partners LLC. He says Breadcrumb and similar payment services can deliver new products and services to merchants that previously couldn’t afford such products. This new legion of payment services, originating primarily from the technology community and not payments, relies on the Internet for distribution and not a bevy of salespeople.

 Breadcrumb POS merchants also will benefit Groupon by providing insight into the redemption of Groupon vouchers, Weinberg says. A consumer may walk in with a $50 Groupon, but end up spending $10 more. With Breadcrumb POS, Groupon and the merchant know what the extra $10 was spent on, he says. If the consumer pays another way, such as with a credit card or cash, Groupon would not see what she spent above the voucher amount. Groupon views Breadcrumb as a pillar to support its daily deals because it combines the vouchers, payment processing and transaction data into one, Weinberg says.


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