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.