Enabling Technologies

LevelUp for Merchants: Revolutionary "Interchange Free"


As a merchant, you couldn't ask for more. LevelUp charges 0% for all payment processing and provides the LevelUp hardware free of charge. It also offers it in a white label format. It sounded edgy to me first time (late 2012) when Seth Prietasch said "Instead of making money just for moving money, payment providers should add value above the transaction in ways that help businesses thrive and grow, such as customer acquisition and customer loyalty campaigns". LevelUp makes revenue when merchants run campaigns to attract prospective customers and reward the loyal ones. For first-time purchases and reward spending, it takes a 40 percent cut.

The mobile wallet and POS solution space is choc-o-bloc with several players vying for space in the market. Though there are number of key players in the market including Google Wallet, Isis, Pay with Square and Paypal, no one company has been able to become the outright leader.

LevelUp, a subsidiary of SCVNGR, is a growing company in the mobile payment space with investment of $9 M in the second round of funding from T-Venture, the venture capital arm of Deutsche Telecom. Other investors included Google ventures, Highland capital and Balderton capital and LevelUp has raised a total of $41 M in capital so far. LevelUp offers a white label payment application, which allows the retailers, banks and processors a mobile wallet and payment platform.

How LevelUp works: 1) LevelUp app can be downloaded into any smart phone 2) A credit or a debit card can be linked to LevelUp to generate a unique code 3) Payment can be made by scanning the unique code.

You can also see the app in action, in the video below:

Source: levelup

LevelUp is accepted at 5000+ locations in the US and there are new locations that are getting added everyday. The founder Seth Preibatsch launched LevelUp with an intention to provide a service which was independent of the carrier or the card payment system. Currently the user base of LevelUp stands at 200k users across the U.S and the total spend at $2M per month.

What's unique about LevelUp is that it is backed by carriers who have their own mobile payment solutions. LevelUp uses T-Mobile's infrastructure & hardware and is invested in by Deutsche telekom. LevelUp is trying to reach out to the end consumer by an unique selling proposition: it has slashed the merchant interchange fee or the swipe fee to zero whereas the competitors charge anywhere between 2-3% for the same. It is still paying the credit card companies for accepting credit cards and is absorbing these costs. LevelUp hopes that this customer acquisition strategy will help it acquire customers quickly.

LevelUp has also upgraded it Point of Sale system to the Aloha POS system from NCR corporation. It hopes to make a difference by having its POS system integrated with the merchants. The merchants do not have to replace their whole POS system, they can use it alongside the regular credit card systems. Its POS system is a standalone device with its own QR code scanner. The merchant's POS is integrated with Levelup, so the 2D barcode scanner does not require a separate power source or an internet connection to work.

Another unique feature of Levelup is the Loyalty program using the rewards app. The rewards app lets customers quickly and easily pay while unlocking loyalty rewards. The more they pay the more loyalty rewards they accumulate and can be redeemed at the participating outlets.

LTP View: Levelup is an amazing start up that brings a mobile wallet for end customers, a POS for merchants and also a white labelled payment solution. Customers get reward/loyalty points in the form of credit points, merchants get everything for free but pay for campaigns. Like other wallet players LevelUp is also trying to capture a large pie of the proximity payments. It is competing against large players like Google Wallet and Paypal. It is trying to differentiate itself with its USP's such as zero transaction fees, no hardware cost, its integrated POS system and its Loyalty programs and thus trying to rapidly expand it user base. It remains to be seen if Levelup shines in the fragmented and increasingly heating up Mobile Wallet and POS market.




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