When I was a kid, one of my relatives gave me $20 in cash for Christmas one year. That was awesome, because $20 seemed like a fortune to me in 1993. But the days of $20 being a lot of money are gone, and it looks like the days of opening letters with cash in them may be slipping away, too. New payment offerings from Square, Groupon (GRPN 1.37%), Intuit (INTU +3.11%), and eBay's (EBAY +0.07%) PayPal are offering customers more ways to pay that eschew the need for gift cards or currency. Here's my ranking of the four offerings from worst to best.
Groupon brings up the rear
Tied for third with Intuit, Groupon has an interesting offer that sounds very good for Groupon customers -- although anyone can work with it. The discounter was all the rage last year, and then companies and customers had a minute to reflect, eventually coming to the realization that no one was winning with this weird strategy. The new payment offering is a chance to get out of the slump and back into the fray.
Groupon Payments works like this: you plug a little machine into your phone -- a recurring theme in these payment systems -- that lets you swipe cards. Like a normal payment processor, Groupon charges the company a fixed and variable fee. For existing Groupon customers, it will match or beat any other processor's rates, which could be a huge boon for some businesses.
Additionally, while Groupon will work with any merchant and their customers, if a merchant has a Groupon for the business, their coupon can be scanned in-app. That updates the total and updates the app's customer tracking database, which gives businesses insight into how their campaigns are going. For small businesses running lots of Groupons -- not my favorite business model, but common nonetheless -- this might not be bad. If a business fits into this specific mold -- Groupon customer, simple transactions, wants to capture emails -- the Groupon offering is certainly the cheapest.
Intuit adds functionality
The physical portion of Intuit's payment system works like everyone else's. But instead of giving you information about the customers that use your third-party coupons, Intuit offers integration with its back-end systems. These offer a whole host of new options for customers and businesses, including recurring payments, partial refunds, and advanced payment options.
Intuit is clearly focusing on medium-sized businesses in a way that Groupon and Square are not. With the additional features, the Intuit platform is perfect for places that offer memberships or services, or for businesses that have complicated or advanced payment requirements. The fees charged by Intuit are in line with most of the other providers, but the real win for the company is that the payment gateway acts like a gateway drug. You get a little bit out of the reader, and a whole lot more out of the backend services that are Intuit's bread and butter.
Square defends its niche
I'll admit my bias and say that, coming into this article, I thought Square was going to be the obvious winner. The company is at the forefront of this level of payment innovation, and has an all-star team behind it. The recent tie-in with Starbucks (SBUX +0.30%) gives the processor a huge boost to visibility, and should increase the adoption of its Square Wallet program, which is aimed at customers, not businesses.
Of the four payment processors, Square seems to do the best at creating a system for businesses without any add-ons. Square clients can attach to receipt printers, manage the check-out screen, and view sales data all through the Square system. As for business type, Square has a lock on small businesses that process simple transactions over and over again. The only thing that stops me from putting Square right at the top is its lack of online payment capability. For that, you need to look to eBay's PayPal.
First in payments once again
PayPal was the first company to understand the new online world in a way that allowed it to break out of the traditional payment mold. Now, it's taking its existing infrastructure and bringing it into the physical store. I won't pretend like PayPal does anything magic in-store -- it effectively does the same thing that Square does. PayPal's big win is its online capability.
Intuit does offer online payment processing, but in its model this is a separate offering. PayPal can tie everything together due to its existing capabilities as a payment processor. That allows you to receive online payments into the same account, and to have funds from any source deposited into a PayPal account linked to a business debit card. It's that full range of functionality that has me putting PayPal at the top of the list.
Having said all that, if Square was public, it would be my investment pick. The growth potential is huge, and its management team is outstanding. But for now, I like PayPal. Not only does it offer an excellent solution for businesses, it also provides investors with many of the perks of bank investment, without any of the overhanging worries about litigation.
For a hands-on view of how businesses are using this new technology, check out the video fellow Fool Rex Moore put together of mobile payments in everyday use. It should give you a better idea of why these products are blowing up now, and who their target clients are.
Editor's note: This article has been edited to clarify information about Groupon's payment system and rates.
