LevelUp is a mobile loyalty and payments platform that enables merchants to accept mobile payments and better engage customers with powerful engagement campaign tools. The company powers mobile loyalty programs for over 14,000 businesses in the United States, and provides nearly 2 M customers with the ability to pay with their phones and automatically accrue/redeem rewards…similar to the Starbucks app.
LevelUp recently announced a new partnership with Sprint and the launch of carrier billing as an additional payment option for LevelUp customers. This means that for the first time ever in the United States, mobile carrier billing can be used to pay for physical goods at all of LevelUp's 14,000 merchant locations.
Let’s Talk Payments had an exclusive interview with LevelUp’s CEO, Seth Priebatsch, to cover the developments at LevelUp and the recent carrier billing announcement.
Q.) Carrier billing was almost written off few years ago in the US. It was successful in some other parts of the world like Asia/Africa/Europe, but in the US it was just chugging along…is it making a comeback now?
Seth: Carrier billing has certainly seen a lot of success outside of the U.S., and I don’t see any reason it should not work well here. I’ll start by mentioning that LevelUp built its platform to be open and flexible, which facilitates our ability to build exciting partnerships like the one with Sprint. Flexibility in our platform also allows us to move with merchant and customer needs in meaningful ways as the mobile space evolves. We believe customers are better served when they are able to choose from a variety of funding sources, including things like Apple Pay and carrier billing. Like LevelUp and our merchants, Sprint is looking to engage with customers in innovative ways, and we’re glad they saw LevelUp’s ability to enable customers to pay with carrier billing in-store anywhere LevelUp is accepted as a great way to do that. The common thread is that we all - LevelUp, Sprint, merchants - share the same goal of providing customers with the best experience possible. Then, of course, there is the significance of carrier billing as an additional option for the underbanked and unbanked; in other words, for people who want alternatives to credit cards.
Q.) To understand it clearly, LevelUp has been helping merchants go mobile and carrier billing has existed in the past as well. Why adopt carrier billing now? Is it because it is making a comeback and is a market trend now?
Seth: LevelUp has a number of long-term goals, one of which, as I mentioned, is flexibility. Flexibility includes opening up as many payment methods as possible to LevelUp users. We placed a high value on having carrier billing as one of those options and worked with Sprint to build a partnership that would make carrier billing a reality.
Q.) Why would a carrier take the risk of including purchased items in their customers’ monthly bills? There could be defaulters. So what did you tell Sprint and how did you convince them?
Seth: Part of that conversation centered around the high level of security LevelUp can provide to minimize the risk of fraudulent transactions. We use a number of technologies, including GPS and beacon technologies, to protect both LevelUp’s and Sprint’s interests in ensuring that purchases are valid. We also worked with Sprint to implement effective mechanisms to prevent against default risks. Generally speaking, there are risks associated with any partnership or business decision, but ultimately we agreed that enabling Sprint carrier billing as a payment method on LevelUp’s platform is a win-win for everyone.
Q.) In the case of chargebacks, are there measures to take care of it?
Seth: Yes, indeed. Customers can always reach out to our support team to address chargebacks, and there are a number of stringent checks and measures that LevelUp has in place to take care of these situations.
Q.) With Sprint taking a cut of the transaction as part of the deal and considering other revenue share aspects, how do you see your monetization happening in this case? Will it be difficult or is this just an investment?
Seth: There is a lot of value coming out of this partnership on both sides. Firstly, this partnership is actually aligned with our overall goal of lowering the cost of interchange - what we call the Path to Interchange Zero. I can’t go into too many specifics, but part of LevelUp’s mission has always been to lower interchange costs for merchants, and carrier billing is very much helping us achieve that. There is also, once again, the huge value of providing LevelUp users with added flexibility when it comes to choosing a payment method. Plus, LevelUp traditionally drives revenues through our customer engagement platform, and that remains the case when users choose to pay using carrier billing.
Q.) We see that you have 14,000 partner merchants which is huge. There has been good stuff written about LevelUp making merchants mobile ready. But on the user side, how much is your focus? Your website mentions a 1.5 mm customer base. So going forward, will you focus more towards growth in the consumer base?
Seth: Absolutely. So, you can think about LevelUp as a two-sided system working to grow both merchant and consumer adoption. There are two ways in which clients can choose to partner with LevelUp:
- They can enable payments using the LevelUp branded application, which provides the merchant with full functionality of our loyalty and analytics platform.
- Many large scale merchants choose to build their own branded apps using the LevelUp SDK to power payments and loyalty.
We see LevelUp as supporting both big merchants by providing a powerful platform that furthers brand advocacy and customer engagement goals, and small merchants by fulfilling their need to be part of a broader network. Both categories of merchants benefit from the cutting-edge tools that LevelUp provides and we make huge investments in our platform with merchants of all sizes in mind.
Q.) Are there any new payment methods apart from carrier billing that you are trying to incorporate going forward? You talked about Apple Pay before. We are very curious to know about how beacon can be utilized because iPhone is using NFC for payments and many people hoped it would be beacons that would take the centerstage. What do you think about beacons and any other payment method that you are planning to integrate?
Seth: Apple Pay is exciting and we do see the potential value of NFC as a payment method for LevelUp users in the future, and we appreciate that Apple Pay is providing an effective experience for customers by using Passbook to enable easy loading and tracking of cards. Regarding beacons, we are currently using that technology to enable a proximity marketing platform for merchants to broadcast messages, offers and coupons. Merchants can customize the way they to communicate with their users when they enter the retail space. Within the next year, we look forward to adding other novel payment methods to customers, whether those are NFC-based or Beacon-based.
Q.) Looking at the number of value added services that LevelUp provides, is it a nightmare in an operational sense to be able to provide mobile payments, loyalty, analytics, etc. How big is your team and how big are the operational challenges?
Seth: The main benefit that LevelUp provides is that everything is part of the same platform. All of our value-adds are part of the same system. Whenever we build a feature, it gets added seamlessly into our core platform. You can think of it as a linear customer experience. Our platform has multiple modules that grow and shift to help merchants better engage customers, but ultimately acts as an integrated platform that always provides an easy, seamless experience for both customers and merchants. There are certainly a number of complexities to this work, but the outcome is always as simple and seamless as possible.
Q.) What could be the next big milestones for LevelUp?
Seth: Folks can look forward to LevelUp moving forward with following initiatives:
- 2 to 3 large-scale merchant integrations.
- Apple Pay integration;
- And, in 2015, a high focus on scalability so that we can continue to provide top-notch support to our growing network of merchants and customers.
We also recently deployed our gift card feature, so people should look out for those this holiday season!