When it comes to mobile payments, the space is still fragmented and consumers have yet to catch on en masse to the idea of getting rid of physical payment cards for a digital wallet. But startups and big companies like Google can agree on one thing: the digital wallet taking over is a matter of when, not if. Boston-based mobile point-of-sale company LevelUp helps merchants accept smartphone payments either tied into their existing point-of-sale system, or as a standalone solution. Today the company is announcing its biggest coup in terms of local business adoption: over two dozen LevelUp merchants will only accept cash or LevelUp one day later this month, eschewing credit cards altogether in favor of the mobile payments solution.
Consumers use LevelUp to pay with their smartphone by opening the app tied to their credit or debit card, scanning a QR code on LevelUp’s readers, and approving the purchase (with NFC terminals on the way so consumers can pay with a tap of their smartphone). Consumers pay nothing, and it’s free for merchants unless they run loyalty campaigns, in which case they pay $0.40 of every dollar they make from those campaigns. The company is one of the only mobile payments solutions that doesn’t charge per transaction, with competitors like Square charging per-transaction fees of around 2.75 percent.
The company’s goal is to make LevelUp the preferred way to pay at local merchants, and to help add to its base of 5,000 supported businesses, in September 2012 it announced it would be building custom white labeled apps so companies could add LevelUp’s payment functionality into their own branded app. Though it already had an API, this white labeled product meant that LevelUp would actually build the app, rather than requiring the company to build it themselves or outsource to a third-party developer.
“We kind of want to take the infrastructure that we’ve built and not just have the LevelUp app and bring that to merchants who want to use it, but also take everything that we’ve created around interchange zero, analytics, the campaigns, the mobile payments, all the security infrastructure, and enable anyone starting with merchants to build on that to create their own really custom experience,” LevelUp founder Seth Priebatsch said in an interview.
Today the company is launching the first of those custom white labeled apps, for sweetgreen’s chain of 16 locations. At the end of the month sweetgreen will start what LevelUp is calling the “credit card diet,” only accepting cash and LevelUp payments in its stores for a three-day period. When that happens users will be able to use sweetgreen’s own Android and iPhone apps or LevelUp’s app to pay, and the company has tied a loyalty program into the apps so for every $100 they spend, customers unlock $10 free (sweetgreen is migrating its current card-based loyalty program, which has over 120,000 users, over to LevelUp). LevelUp is also holding a one-day credit card diet day with dozens of their other merchants across the country at the end of February, and will be encouraging businesses to have staff in store to assist people with downloading the app.
“There’s still a big group of people…that are the silent, complacent majority. Credit cards have just always worked…they don’t really think too much about is there a better way they can pay to save more money,” Priebatsch said about the motivation for the credit card diet, specifically breaking people’s ingrained payment habits. “We thought that the best way to do it…was to just make the complacent option disappear.”
It’s a risky move for merchants, who stand to alienate customers who are used to paying with MasterCard and Visa (both of which have their own mobile payments solutions, PayPass and V.me respectively, though they’re not necessarily accepted in all stores). It also only supports customers who use Android, Windows Phone, or iPhone devices, and though anyone else can get a LevelUp card to pay in-store (similar to Google Wallet’s physical card), the likelihood that they would go to that trouble when it’s the same experience as swiping a credit card is minimal.
The strategy might work in the U.S., where the idea of bank account-linked debit cards isn’t as prevalent as in places like Canada, where banning cards would be banning one of the most prevalent form of payment. Since LevelUp is U.S.-only for now it isn’t a problem, but if the company wants to become a global player in mobile payments it will have to expand, similar to how Square has started its international march in Canada, with European launches expected soon.
Since sweetgreen’s credit card diet is only for three days, it shouldn’t have too much of an impact on sales, but will be a good glimpse at whether consumers are really ready to let go of paying with plastic. At the very least it will be a good in-store education tool for LevelUp, though even merchants aren’t on board with the idea of giving up credit cards forever – as Priebatsch noted, ”[merchants said] we’re not going to stop taking credit cards forever, because that’s pure crazy talk.”