Mobile-Payments Startup LevelUp Expands Its Footprint With a New Heartland Partnership

LevelUp, the mobile-payments unit of Boston-based SCVNGR Inc., announced a partnership with the big merchant acquirer Heartland Payment Systems Inc. on Thursday that will dramatically expand its national reach with merchants and make its white-label mobile app more affordable to merchants wanting to increase their loyalty marketing.

The agreement gives LevelUp access to Princeton, N.J.-based Heartland’s 800-person sales staff, which targets many of the key merchant categories LevelUp is looking to penetrate, such as restaurants, convenience stores and grocery stores. Heartland processes for about 10% of U.S restaurants and 50,000 convenience stores, according to Ian Drysdale, president of Heartland’s Network Solutions Group.

Heartland also sees opportunities to leverage its merchant relationships with many universities and schools in order to introduce LevelUp to a new generation of consumers that are apt to be highly receptive to mobile payments, according to Drysdale. “It’s a chance for us to teach young consumers about a new way to pay,” he says.

LevelUp has signed about 5,000 merchants nationwide and 1 million users, up from about 1,200 a year ago and 500,000 four months ago.

Consumers fund their LevelUp wallets with a credit or debit card. To make a purchase, consumers open their smart-phone’s LevelUp app, which displays a bar code linked to their funding source, and scan it at the point of sale. The purchase is then charged to the consumer’s card.

The agreement with Heartland does not affect LevelUp’s relationship with Boston-based independent sales organization Merchant Warehouse, as Heartland will only process transactions for merchants it signs to accept LevelUp.

The new partnership also will make LevelUp’s white-label mobile-app development kit more affordable to merchants by reducing the cost by 25% for merchants with 10 or more locations that switch their processing to Heartland or extend their existing contract with the processor. Merchants pay $40,000 to $60,000 to use LevelUp’s application programming interface (API) codes to create their own branded mobile-payments application for each mobile-phone operating system for which they develop an app, such as Apple Inc.’s iOS or Google Inc.’s Android.

Merchants easily can spend $1 million or more to develop their own mobile app. LevelUp and Heartland will underwrite the discount.

“The discount is not being offered as a reaction to merchant concerns about the price, but as a way to incent merchants to accelerate the integration between marketing and payments and do so through the mobile channel,” says Chris Mahl, chief revenue and strategy officer for LevelUp.

So far, about 20 merchants ranging in size from two to more than 30 locations have purchased LevelUp’s white-label app kit and another 50 have expressed interest in the tool kit, which LevelUp began selling about six weeks ago, Mahl adds.

Merchants can brand their apps and push promotions and incentives to consumers through their LevelUp wallet. The app also gives merchants access to back-end analytics and customer transaction and demographic data that they can use to create more personalized offers for consumers.

“Merchants really don’t know much about consumers that pay with a credit or debit card, because the customer’s relationship is with the card issuer,” says Drysdale. “The mobile app gives the merchant more control over the customer relationship.”

Heartland also will make its E3 terminal available to LevelUp merchants. The terminal provides data encryption for all transactions as well as tokenization to prevent cardholder data from being used by hackers. The terminal is compatible with near-field communication (NFC) technology and will include a scanner to accept LevelUp transactions.

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