SCVNGR/LevelUp’s Mobile Payment Application Goes National

SCVNGR has announced the national rollout of its mobile payment product LevelUp, which the company has been testing in Philadelphia and Boston for the past two months. LevelUp integrates the Boston-based company’s signature game mechanics into a mobile payment application that allows patrons to complete a transaction by scanning a custom QR code while seamlessly participating in rewards programs.

LevelUp was initially launched in March as a deal platform but after an eight-week beta, the company decided to return to the drawing board, the company’s “chief ninja” Seth Priebatsch told Street Fight in an interview: “We piloted the deal model, and well, it didn’t work.”

So the team effectively flipped the daily deal model on its head; instead of buying $20 of credit for $15, as is the case with daily deals, you now earn $5 of credit when you purchase $15 worth of merchandise.  In moving away from the daily deal model, LevelUp jumped into the slower moving, but giant-filled mobile payment/wallet space where Google and American Express have been patiently building out their products.

Priebatsch says the advantage of LevelUp is with the application’s focus: “The single biggest difference is that LevelUp is a product, not a platform. We are not building an NFC environment where we want others to jump onboard and we are not building a wallet where we want users to throw their credit cards into.  We are building a killer product, which does one thing: it makes paying over your phone fun and rewarding.”

The company boasts some impressive numbers from the beta phase, but a national rollout tends to be the litmus test for companies in the hyperlocal space. Scaling sales and customer service relationships is a monumental task for any technology company serving SMB’s, particularly when the infrastructure is in-house, as it is with the SCVNGR/LevelUp team.

Unlike other players in the rewards/mobile payments space who are plugging into existing sales networks, the venture-funded company is staffing offices in each local market with three full-time sales and implementation specialists.  LevelUp does have the advantage of drawing on SCVNGR’s extensive local merchant data, which it will be leveraging to select potential merchants through a Boston-based lead generation team phonetically named “Legion” (lead-gen).

Scaling-issues aside, LevelUp is a fascinating play for SCVNGR. Priebatsch is a big thinker (if you haven’t seen his TED talk, watch it here), but the decision to build LevelUp as a separate application shows a remarkable degree of discipline.

“The goal behind the whole LevelUp experience was to have two products: one that brought the game layer to social, which we did with SCVNGR, and the other, to do [game mechanics] in a transactional way,” says Priebatsch.

He explains that location-based interaction will follow two paths after the check-in: “One vector [will work to drive interaction] through either a more fun and engaging experience with richer, more social experiences as SCVNGR does with the challenges, or through an information layer as Yelp does with reviews.  The second vector is to actually create financial value.”

So why not integrate the two paths?  Priebatsch says that time will come but right now, people are just not ready.  “The reason we did LevelUp as a separate product is that I don’t think the social vector and the transactional vector actually connect yet,” says Priebatsch. “I really believe that right now people want that experience, when it’s at a location and involving a transaction, to be private.”

Priebatsch’s perspective adds an interesting lens in considering the future of the location-based application space.  Foursquare, which has shown a penchant for a more platform-oriented, API driven approach to growth, already has an agreement with American Express’ mobile payment solution Serve and appears poised to integrate transactions into an essentially, social product.

“All of these concepts have to start with a product that the market is ready for right now,” Priebatsch says about emerging technologies like mobile payments and location sharing. “We pushed on the game mechanic layer but as for the transaction/social divide?  I think that’s a problem for Facebook to solve.”