LevelUp Expands to 4 More Cities, Doubling Footprint

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Mobile payment and loyalty app LevelUp launched in four new markets today, doubling its footprint a little over three months after leaving Beta. The app, a sibling of location-based social discovery app SCVNGR, is now available in Seattle, San Diego, Chicago, and Atlanta, in addition to its launch markets of Philadelphia, Boston, New York, and San Fransisco.

LevelUp brings SCVNGR’s signature game mechanics to the loyalty space, allowing users to seamless participate in rewards programs created by local merchants. Users pay by scanning a QR generated within the consumer application through a separate merchant application, which is available on any android device.

In December, the company partnered with T-Mobile to provide merchants with a branded dock to accept payments, though merchants can still use the app without purchasing extra hardware.

So far, the Boston-based company says that LevelUp has seen good engagement in its launch markets, with 45% of users returning to pay full price within thirty days and the company doubling its stats every 3.8 weeks.

“The fact that each of these markets has a strong local tech community is really important to us,” SCVNGR/LevelUp Chief Ninja Seth Priebatsch said in an email to Street Fight. “We’re planting permanent roots in these cities and want to both strengthen the local business ecosystem and be a valuable contributor to the local tech economy, both in terms of jobs and resources.”

“Most of our [SCVNGR] business partnerships are with national brands on an enterprise level, so almost of our local merchant relationships have been built through LevelUp,” said SCVNGR/LevelUp’s sales VP Christina Dorobeck.

Part of LevelUp’s success could be to the equal attention the company focuses on merchant acquisition and merchant education. Discussed in detail in “The Local Merchant,” a Street Fight Insights report released last week, the company has made a concerted effort to educate the entire staff of participating business on the ins-and-outs of the payment and redemption process. The report finds that “this type of personal attention helps alleviate merchants’ fears and provides employees with extra incentive to promote the deals they have spent time learning how to redeem.”

The merchant acquisition process has largely been built from scratch, says Christina Dorobeck who heads up Sales for SCVNGR/Levelup’s VP of Sales. “Most of our [SCVNGR] business partnerships are with national brands on an enterprise level, so almost of our local merchant relationships have been built through LevelUp.”

This does not mean that LevelUp is not getting a lift from SCVNGR on the consumer-end. Dorobek would not provide hard figures, but said that LevelUp “was able to invite a lot of SCVNGR players in Boston and Philadelphia to test out the product.” The extent to which, LevelUp has relied on SCVNGR for acquiring users is unclear, but the move outside of the company’s home turf will undoubtedly make the entire engagement process substantially more difficult.

In the past few months, the loyalty space has become a big point of focus for a handful of location-based services, looking to build companies, and generate profit. Foursquare has been adamant about building its merchant product in step with its consumer platform from the start, and loyalty is at the center of its product.

The big issue for the space is where exactly payments fit into the equation. Any company building a next-generation loyalty product understands that to be competitive, it’s essentially to have access to the point of sale — not only in order to create a seamless consumer experience, but also to be able to access and own the sales data attached to each transaction. SCVNGR/LevelUp and Foursquare are implementing markedly different transaction strategies and the split in part stems from a fundamental difference in how the companies’ leadership sees the payment space evolving.

Foursquare is making a substantial bet on the ability for the existing players in the payment processing industry to adapt and fend off potential disruption from mobile payments. The company has partnered with American Express to tie into payments of participating customers, and plans to expand that partnership over the next few months.

LevelUp’s decision to process payments, on the other hand, stems largely from Priebatsch’s Interchange Zero thesis, which essentially predicts that a media-like disruption will occur in the payment space over the next decade. He argues that money, like media, is a form of information and interchange rates have traditionally been levied as means to pay for the exchange of that information: “Before Al Gore, um, invented the Internet, we never imagined information would flow so freely,” Priebatsch explained in an October guest article in Inc. “But as soon as the friction was removed from information-transfer, a new economy emerged that totally changed the way we do business.”

What emerges is a new payments industry in which, information, not distribution, becomes the primary value-generating resource. When “interchange zero” is reached, the Amex model will essential be flipped on its head: merchants will pay companies for data-driven services like loyalty programs, and will receive payment processing as complimentary part of the package.

Steven Jacobs is an associate editor at Street Fight.