How LevelUp navigated the cutthroat world of mobile payments

In the chaotic early days of mobile payments, many mobile wallet startups weren't likely to last long. And many didn't.

Some tried to survive by changing marketing campaigns, technology, target audiences or partners. LevelUp did many of these things too, steadily building an audience and working with major partners like JPMorgan Chase, NCR and Sweetgreen.

LevelUp's experiments included flat-fee processing (which merchants rejected in favor of traditional interchange), NFC payments (which never replaced its standard QR code system) and even giving Google Glass to cashiers. Its platform, once based on using a 3G smartphone to read QR codes, eventually became a white-label system with dedicated hardware.

It's hard to tell which of these ideas and eccentricities can set a company apart or doom it to failure. Boston-based LevelUp's latest effort of targeting restaurants seems to be a success — it recently added 25 more brands to its client base of more than 200 restaurant chains and 50,000 locations.

"Considering the failure rate of mobile payments startups, just being in business for this long is a big win," said Richard Oglesby, president of AZ Payments Group and a senior analyst at Double Diamond Payments Research. "But LevelUp has also won some big clients, and services a significant number of locations — and that’s uncommonly strong production in mobile payments and digital loyalty."

Restaurants are a crowded niche in mobile payments. LevelUp's technology was already well suited for take-out dining and fast food — its gamified interface entices people to visit and return to individual merchants to earn rewards — but other companies have taken a more targeted approach with offerings designed specifically for that vertical.

LevelUp's approach to this market plays to the company's origins. LevelUp — officially named SCVNGR — wasn't originally a payments company. It launched in June 2008 as a gamified daily-deals platform before becoming a mobile payments company in July 2011. As such, its roots are in scrutinizing customer data and habits; payments were an afterthought.

For LevelUp, the difference is under the hood. Its system provides essentially real-time payments and customer data collection for restaurants to put to use.

"We are rolling out a lot more functionality for restaurants to be able to connect to their customers through speaking messages, and the operators can program custom messages based on different customer attributes," said Christina Dorobek, chief sales officer at LevelUp.

LevelUp's system can identify current customers in the store, or those walking by, and communicate to them through mobile notifications. Through its recently launched Broadcast service, LevelUp also engages with customers who patronize the restaurant through other means or other apps.

Broadcast helps restaurants advertise their menus through various channels, and also accept mobile orders. Those channels include Chase Pay, Apple Pay, Android Pay, Amazon Alexa, Foursquare, Facebook Messenger, Yelp and others.

"We have a broader view and ways to engage with customers even if they are using the Yelp app to place orders instead of the merchant app," Dorobek said. "It's just a way to drive higher adoption."

Development of third-party partners has also fueled LevelUp's staying power. The company received a $10 million investment from Chase in 2016, one that brought potentially millions of cardholders paying through the Chase Pay app and into the LevelUp network.

In some cases, Chase has even branded LevelUp's hardware as Chase Pay scanners, taking payments and loyalty redemption through the LevelUp network.

"It's a compelling user value prop when the consumer can use earned points to pay for lunch, and for the operator who can see the benefits of the rewards that the card brands are also giving to their customers," Dorobek said.

LevelUp hired Theresa Dold, an executive from Sweetgreen, one of the first clients of LevelUp's white-label platform, to focus on how the restaurants could best use their newfound data from the LevelUp system.

"Theresa definitely helped in bringing in new clients," Dorobek said. "She was responsible for the Sweetgreen app in what was becoming a cashless environment."

Only 18% of payments at Sweetgreen are with cash, the same amount using Sweetgreen rewards through the LevelUp-powered app to make payments. When a restaurant sees a 7% to 10% increase in average ticket sale, or a 20% increase in average frequency and add those to 25%, 30% or 50% adoption, it will equate to "massive revenue increases," Dorobek said. "We can come in with those case studies and that data and get the corporate or the licensee to buy in."

The most recent to buy in were national chains Smoothie King and Zaxby's, and newer clients Honeygrow, Wings Over, Evergreens, Pret A Manger, The Human Bean, Clean Juice, Showmars and Flour.

It all indicates that LevelUp has some staying power and is delivering what restaurants need in an advancing digital age, AZ Payments' Oglesby said.

"LevelUp started as a consortium loyalty program, most of which have failed, but the 2012 pivot to a white-labeled solution powering restaurants’ own loyalty programs was the right move at the right time," Oglesby added.

Restaurants have been moving aggressively to take part in the mobile economy, and LevelUp has positioned itself well to deliver the goods and let those restaurants do it under its own brand, he said.