Square competitor pockets $12M to expand nationally

With chains Johnny Rockets, Coldstone Creamery, Ben & Jerry's, LevelUp looks at covering more ground

While Square is the leader in mobile payments, there are a lot of players in this game now and one Boston-based company, LevelUp, has just annoucned that it raised a $12 million round of funding. 

Existing investors Highland Capital, Google Ventures, Balderton Capital and new investors Continental Investors and Transmedia Capital all participated in the round.

This round comes as the company has seen significant growth -- it is now available in more than 3,000 merchant locations in eight cities in the US, including big brands such as Ben & Jerry's, Coldstone Creamery and Johnny Rockets.Now with approximately 2,000 users spending an average of $2 million per month through the app, LevelUp is climbing the ladder into the mobile payment sector with big boys such as Square, PayPal, Visa, and Mastercard.

This round of funding will go toward the company's nationwide expansion.

The mobile wallet market has reached a fever pitch this year. With tech companies zoned in on turning your mobile devices into methods of payment, consumers are going to find a lot more value in keeping their smart phones close -- and merchants are clamoring to pick the services that give them the best competitive edge.

How it works

LevelUp uses a QR-code to help consumers instantly pay for their food at a restaurant while tying in loyalty specials so that merchants reward their most diligent patrons.

Matt Kiernan, marketing director at LevelUp, chatted with me about how many companies are trying to use technology to make the checkout process easier for consumers while learning more about them.

"When customers have a quick and easy way to do business with a vendor they love, they end up shopping their more and spending more money," Kiernan has found. "Wait times are going down and the amount people spend is rising when these simple tech additions are incorporated."

LevelUp charges a 2% flat fee to merchants and is free for consumers to use. No fumbling for your credit card or signing anything, just hold your QR code up to the reader.

Many of the businesses have made sure to incorporate $5 off or other deals for people using the app to purchase from the company.

Merchants also have the option of renting the scanner for $25 or they can download an app for their mobile device for free that also reads the QR code. This make a faster check-out option much more affordable for small businesses and vendors that are mobile themselves. 

There are also some fun bells and whistles on the merchant scanner, if a company wishes to use it. They can customize the colors that flashes when the code is successfully scanned. LevelUp is also eyeing the POS side of retail/restaurants. 

"We are hearing great things from the more than 2,500 companies using LevelUp and they are also asking how they can streamline their whole checkout process," Kiernan touted.

LevelUp certainly isn't alone in its desire to advance the POS systems that usually cost a lot of cash up front, are confusing to use, take a long time to get repaired and are not mobile in the least.

Mobile payments

San Francisco's mobile payment service Square, founded by Twitter's Jack Dorsey, first tackled the credit card machine by creating a an iPhone accessory to mobilize, digitalize, and simplify what is needed to complete a credit transaction and now it is expanding its reach by re-thinking the whole POS for businesses.

The new Square Register, unveiled earlier this year, extends the credit features to now accept cash payments, lets merchants create list menu items, and tracks the history of customers' purchases.
Currently, nearly 75% of U.S. merchants are in the market for tablets and tablet apps to incorporate into their business and more than half of retailers are gearing up to use a mobile POS device within a year to 18 months, compared with a slim 6% now.

The status quo POS systems are often cumbersome in size and pricing -- many cost in the thousands per year to install and maintain, while Square has the attractive price tag of $0 and just charges a percentage fee based on the number of transactions logged into the system.

Square, which makes its money by collecting transaction fees, has helped merchants process sales for $4 billion worth of goods — double what it announced late last year. More than 1 million people are able to accept credit cards with Square. Their average purchase is $75.
Square has no plans at this time to launch a version of Square Register for Android tablets.

Founded at the tail-end of 2009, Square has veiled exceptional growth year-over-year in the volume of sales transactions. By the close of 2011, the tech startup boasted that it was clocking in $2 billion in sales and now the company says it is processing $4 billion in payments per year.

Today, Square announced that it was partnering with mobile health startup drchrono to allow doctors and staff to make transactions through their iPads or iPhones. Now that is some real innovation in my mind.

Since LevelUp, and others, offer a pin code option so that each time you are about to complete a transaction, you have to enter a unique pin to insure that someone can't just use your phone for fraudulent purchases, it is technically safer to use than your wallet full of cash. 

With mobile-payment technology in the United States is still in its infancy, we can expect credit card companies and the mobile payment service will spend the next year or so educating people and working with one another to create better protections to avoid fraud when moving toward convenience -- especially since everyone is expecting Visa to deliver its own proprietary payments system very soon.