Today digital wallet app Lemon is announcing $8 million in Series A funding, led by Starbucks founder Howard Schultz’s Maveron fund, with participation from Lightspeed Venture Partners, Draper Fisher Jurvetson, and The Social+Capital Partnership, among other investors. The company is also announcing its Smarter Wallet feature, which allows users to create a digital backup of their physical wallet, so in the event it’s lost or stolen it’s easier to replace items. Lemon has had over 1.6 million people in over 200 countries download its apps for iOS, Android and Windows Phone since launching in October 2011.
“It’s mostly to hire engineers to develop our product pipeline, and that’s where the core will go,” Lemon CEO Wences Casares said in an interview, referring to several planned products including a tablet app. He said the funding will also go towards marketing and customer acquisition. And while right now the company’s target markets are North America and other English-speaking countries, they’re working on translating the app into different languages to target additional international audiences.
Today’s Smarter Wallet feature is an extension of the company’s digital wallet app, which allows users to snap photos and store info from their receipts, identification cards, credit cards and loyalty programs. Users’ info is encrypted, and only accessible with a unique four-digit PIN code. While there is a basic free account, Lemon offers a pro account for $9.99 per month or $99 annually, which is an ad-free version with unlimited free line-by-line receipt scanning. Lemon’s free accounts charges users $0.99 for each in-depth scanned receipts (line-by-line scanning as opposed to just date, location and amount), and restricts access to shared expense tracking and the ability to export data to third-party applications like Expensify. The Smarter Wallet feature will eventually offer pro users the ability to cancel and replace a physical wallet’s contents with the touch of a button, which will be available later this year.
Casares said the goal with Lemon is to continually add different compartments with different functionality, all with the goal of eliminating the need for users to hold on to paper copies of receipts, or use five different apps from five different retailers or financial institutions in order to make and track purchases. ”There are some categories that belong to almost all home screens,” Cesares said, citing messaging, navigation, and upcoming categories like social apps and cameras. “We strongly believe that one of these applications that makes sense on your home screen is your wallet, and by wallet we mean something that makes sense of your digital identity for transactions.”
Though users can add loyalty cards and use them by scanning a barcode in the app or showing their account number to a cashier, the app doesn’t eliminate the need for payment cards, since one of the main features missing from Lemon is the ability to make a payment using the app. While the digital wallet stores payment card information, users still have to carry around their cards to actually make purchases in-store. Casares said they’re working to make payments part of the app, but he said the industry needs to set a standard for mobile payments before they can implement it.
Cesares said that they are currently working with third-party partners in the loyalty and rewards space, and that they will work with other third-party partners to build on the concept of an “open wallet.” As part of this, the company will be releasing an API this summer to allow developers to build on Lemon’s app. “For loyalty cards and also for all the other compartments we believe in the concept of an ‘open wallet,’” Casares said. “We build the critical functionality that is needed for the consumer to be able to use that compartment, but beyond that we want to make it easy for third parties to use us as a platform to reach the consumers and to provide this service so you don’t have to keep using multiple applications for something that all has to do with your transactions.”
Lemon faces considerable competition, both from other digital wallet apps like Acrylic’s Wallet app, and from manufacturers like Apple that are building loyalty and transactional features into their hardware. Apple just unveiled its Passbook feature for iOS 6, which will basically provide exactly what Lemon wanted to do with its API, but as a pre-installed feature on all future iPhones. The app also competes with apps from individual financial institutions, as well as other loyalty apps like Belly. But Casares believes that providing a “one app to rule them all” approach to a digital wallet will win out over those stand-alone solutions. ”It’s just more likely that you have access to all of the transactions in one place, and they can empower each other, so the application can see that you bought at Best Buy and you had a coupon for that store and apply it automatically.” It’s clear that Apple agrees, and that might take some of the wind out of Lemon’s sales depending on where it plans to take Passbook with future hardware upgrades, like the rumored addition of NFC to the next iPhone.