by Quang Truong


LevelUp is a Cambridge, MA mobile payments company launched in March of 2010. The brainchild of Seth Priebatsch, founder of SCVNGR, the company was initially operated as a daily deals platform before switching exclusively to mobile payments by July 2011. Essentially, LevelUp is a mobile app for iPhone and Android phones that allows users to pay merchants by waving their smartphones in front of a LevelUp receiver. Users can also receive deals and discounts to local merchants through the application, encouraging customer loyalty. LevelUp has also been generating a great deal of buzz because of the company’s unique philosophy of “zero interchange”, the belief that merchants should not be charged the typical 1 to 3% fee for accepting credit and debit cards. Today, the company has 148 employees and is offered by over 4000 merchants and 1,000,000 end users.



LevelUp users start by downloading the app onto their smartphone and linking their credit or debit cards directly to their account. No money is ever stored on the phone. LevelUp then generates a unique QR code for the user, which can then be waved in front of any LevelUp receiver to make payments to the merchant. At the point of sale, LevelUp charges the consumers’ credit card account, eating up the cost of the credit card interchange fee itself while paying the merchant the full price of the transaction. Because LevelUp is losing money with each transaction, the company makes money through several ways. First, the company takes 40% off of the transactions it helped generate through “Acquisition Campaigns”.

For example, a fine dining restaurant hopes to attract new customers by offering a $10 credit. LevelUp advertises this dining credit to local users, and a customer decides to eat at the restaurant purchasing a $50 meal. Using LevelUp, the customer would pay $40, and LevelUp would receive $4 and the merchant $36.

The same restaurant could also initiate a “Loyalty Campaign” by offering, for example, returning customers a $20 discount for every $200 spent. LevelUp makes 40% in this case as well, receiving $8 dollars out of the returning customer discount. The majority of revenues are generated in this way, although LevelUp also creates income by providing advertising counsel to merchants. For a negotiated fee, the mobile payments startup will help merchants design a “white label” payment application featuring the merchant’s specific brand, or co-market a specific business along with LevelUp. Formerly, LevelUp generated revenue by charging merchants a $25 per month fee for the terminal as well as a 2% interchange fee, similar to Square. However, the interchange fee was eliminated in June of 2012 and merchants can now request point of sale scanners completely free of charge.


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