Архив метки: SCVNGR

LevelUp Now Has $21M To Take On The Squares Of The Mobile Payment World


Mobile payment service LevelUp, an off-shoot of Boston-based SCVNGR, announced this morning that it has raised $9 million from T-Venture, the venture capital arm of Deutsche Telekom. The investment is the second tranche of a larger funding round and brings the total raised to just over $21 million. SCVNGR itself has raised over $31 million. As a result of the investment, T-Venture Senior Manager Randeep Wilkhu will join the startup’s board as an observer.

As for some context: Every day there’s a new headline about mobile payments solutions. It seems that every carrier and credit card company has its own system, while all the big mobile players are working on one or have one already on the market (Google Wallet). The rumors indicate that the iPhone 5 will have NFC functionality to enable Apple’s entry into the mobile payments game. The point is: It’s easy to be skeptical of new solutions, especially when it comes to long-term viability.

Yet, in spite of the apparent saturation and the success of Square and others, no one solution has emerged as the outright leader. That’s why Seth Priebatsch launched LevelUp (as an off-shoot of SCVNGR) in beta last July, hoping to create an easy, carrier and card-agnostic payment and loyalty system that could be used everywhere.

Since then, the company has grown its U.S.-based staff to 162 and Priebatsch expects the team to grow to 200 by the end of the year. As of today, LevelUp users can pay with their mobile device of choice at 3,000 participating merchants, which include Ben & Jerry’s, Quizno’s and Johnny Rockets, and more than 200K users spend a total of $2 million per month using LevelUp. In turn, Priebatsch wants the service to be in 50 cities in the U.S. by the end of the year and said that they plan to announce some even bigger nationwide chains this fall.

So, while there’s plenty of speculation over which of the major mobile payments players will crack the mainstream first, whether it’s Google Wallet, Isis, Pay With Square, or PayPal, perhaps the biggest validation for the service comes from the fact that several of LevelUp’s backers are now investing in the startup on top of their own mobile payment solutions. T-Mobile lent infrastructure and hardware to LevelUp to help it get off the ground, the founders of Discover invested in the startup’s first tranche — and now Deutsche Telekom via T-Venture.

Priebatsch said that he believes this a result of the fact that the startup is religiously attempting to remove the major barriers that prevent people from paying at local merchants with their phones. For now, that means LevelUp relies on the QR code as its main payment mechanism, but down the road that will mean adopting NFC. “We’ll do whatever it takes to get LevelUp into the hands of the masses,” Priebatsch tells us, “and that starts with providing value to merchants so they actually want to consider adopting another mobile payment network.”

To do this, the startup recently announced that it has lowered its merchant interchange rate (a.k.a. “the swipe fee”) to zero. Now, LevelUp merchants pay 35 percent to the startup each time a consumer redeems first-time and loyalty rewards, so, because the revenue from this charge matched the interchange fees, Priebatsch says, the company decided to just go ahead and cover those fees itself. Why not?

In turn, the team hopes that this will offer a better acquisition strategy, removing the friction for many merchants that would participate otherwise. With Square charging 2.75 percent and most others at 3 percent, LevelUp starts to look good in comparison.

Merchants still end up paying more to LevelUp as part of that 35 percent charge, but the founder thinks that it can make up the difference by offering merchants one single solution for customer acquisition, retention, and analytics — exchanging zero credit card fees for a share of that business it creates by way of its loyalty rewards campaigns.

There’s no reason that other companies with big mobile payments solutions (like Starbucks) couldn’t eliminate credit card processing fees, which would mean that LevelUp would have to compete with name brands — further tilting an already uphill battle. In the meantime, Priebatsch and the LevelUp team are pushing to scale the system in the U.S. (and internationally) as fast as possible, hoping to achieve enough penetration in the next year so that, when the cards fall, LevelUp will have a presence that will be hard to ignore.

LevelUp Now Has $21M To Take On The Squares Of The Mobile Payment World

Mobile Payment Solution LevelUp Now Seeing $1M Per Month In Transactions; Launches API

Screen shot 2012-02-29 at 5.00.30 PM

With increasing smartphone adoption and with users in turn becoming more and more comfortable using their mobile devices to do things traditionally reserved for the Web or desktops, every industry is going mobile. But, when you consider the effect mobile technology has still yet to make on transactions — ye olde exchange of money/goods — there is a huge opportunity for disruption. Carriers, OEMs, startups — everyone knows this. Three, five years from now, mobile payment solutions has the potential to be a massive business. Yet, as things stand right now, carriers and mobile OSes are still finding it hard to come to terms, with users suffering as a result.

That’s why SCVNGR decided to spin-off (and subsequently focus more resources) on LevelUp, a mobile payment and rewards network, which it launched into beta in July 2011. The mobile payments networks has been growing fast, SCVNGR and LevelUp Founder Seth Priebatsch tells us, as it now counts over 100,000 users and has partnered with 1,400 merchants in Boston, NYC, Philadelphia, Atlanta, Seattle, San Francisco, San Diego, and Chicago.

First and foremost, the problem LevelUp is really trying to solve is offering a way for users to bypass NFC or having certain cards to pay for their goods. Now on iPhone, Android, mobile web, and good old physical card form, users simply use the apps to register their most-used credit card or debit card on LevelUp. From there, they get their own unique QR code, which they can simply scan at one of those 1,400 locations. The transaction is completed, and they’re emailed a receipt.

Simple enough, right? But the real key to success in the mobile payments game is scale. It’s about offering a solution that is carrier and credit card-agnostic. ISIS has the clout of all the major carriers and credit card companies, but it’s really not going to get rolling until 2013. In the meantime, there’s plenty of room for existing (and newcoming) players to shake things up. So, Priebatsch says that he wants LevelUp to do away with the limitations imposed on mobile payments solutions by those typical niche requirements, so that anyone with a web-connected device can show up at their favorite merchants and pay.

LevelUp is already seeing some good engagement with its app, considering the fact that $1 million in transactions took place through its system for all of 2011, but it is now seeing its users spend over $1 million at local businesses per month, and engagement has been doubling every 5 to 6 weeks, according to Priebatsch.

On top of that, LevelUp is announcing today that it is releasing a beta API, which will hopefully allow developers to accept LevelUp payments from third party software or POS platforms. The CEO said that the company already has about 10 companies working to integrate LevelUp into their POS solutions, and the first integrations will be announced soon. (Developers can sign up here.)

This is all well and good, but most would probably agree that NFC is the future for mobile payments. So where’s LevelUp’s NFC integration, you ask? With a solution that focuses mainly on a QR code reader, one might think that LevelUp believes QR codes are going to beat NFC in the end. Priebatsch says it’s quite the contrary, but that it’s going to take several more years for NFC to hit the tipping point. And what’s more, he doesn’t think the specific technology you use matters to the end-user, NFC, QR Code, ultrasonic — it’s about offering a solution that the majority of people can use, with the majority of credit cards, and building value on top of that agnostic platform.

That being said, the LevelUp CEO says that the next generation of LevelUp docks (the hardware merchants use in their stores) already have NFC support. “We’re ready for NFC, it’s just going to take a while before any consumer can use it,” he said.

He thinks it’s this kind of preparation for the consumer’s technology choice du jour that will allow them to be competitive in the long-run, in what is certainly shaping up to be a crowded space. When you look broadly at mobile payment technologies, you have PayPal, Square, Amex Serve, Visa PayWave, Master Card PayPass, Starbucks, Google Wallet, Dwolla — all in various ways building solutions around certain aspects of the mobile transactions.

The definition for “mobile payment technology” tends to be broadly applied, but Priebatsch says that, if one defines mobile payments as those solutions which actually let you use your phone to pay for a good or service in a physical location, then LevelUp has become the second largest player in the space. Measured by active users and dollar volume, of which LevelUp is now seeing $1 million per month, that puts them in second behind only Starbucks.

But Starbucks probably won’t be applying their technology, to say, Peet’s Coffee. And, of course, there’s Square, which has a much broader reach and adoption, but its flagship product is a mobile card reader for merchants. It still involves a swipe, whereas Square’s Card Case app more directly competes with what LevelUp is doing, although it’s still early on its development.

It’s a big claim to make, but LevelUp thinks that its early traction justifies the optimism. Bringing on 400 new merchants in February, partnerships with Ben & Jerry’s, Quizno’s, and hardware and infrastructure provided by T-Mobile doesn’t hurt. It led to the startup adding 400 new merchants in February. There’s a lot left to be said for the mobile payments space, but certainly one that erases the friction inherent to fragmentation of carriers and credit card companies and just allows a simple phone scan, could be huge. But it has to hit scale fast, before Square, Isis and others really get rolling.

For more, check out LevelUp at home here.

Mobile Payment Solution LevelUp Now Seeing $1M Per Month In Transactions; Launches API