The Waltham, Mass., micropayment software vendor Peppercoin Inc. has sold itself to Chockstone Inc., a Portland, Ore., loyalty marketing vendor.
The deal closed Friday and was announced Monday. No price was given.
Peppercoin's aggregation software, which bundles several small transactions into a large one, lets merchants accept payment cards for low-cost goods and services while paying fewer interchange fees.
It can be used at the point of sale or online and can work with prepayment and subscription pricing.
Peppercoin also has been moving into the loyalty business. Last year it introduced software that connects payment cards to a merchant's loyalty program, enabling shoppers to accumulate reward points by using an enrolled card. Merchants say this setup is more convenient for customers than requiring them to carry, and present, a second card with loyalty account data.
"Peppercoin's done some really interesting stuff in the loyalty and rewards space," said Jeffrey Lipp, the president and chief executive of Chockstone. "We've actually started to see more of them in the market."
Though Chockstone already had a similar product for connecting payment cards and loyalty accounts, buying Peppercoin "adds more momentum to the path that we've been charting, specifically in the restaurant and convenience store industries," he said.
Garden Fresh Restaurant Corp. of San Diego and the Cambridge, Mass., coffee and ice cream chain Toscanini's are Peppercoin customers.
Loyalty programs that encourage consumers to use payment cards instead of cash enable merchants to collect valuable data on repeat customers and make targeted offers, Mr. Lipp said, and using a credit or debit card instead of a gift card encourages even more use.
"It's not just 'Deplete the card and throw it away,' " he said. "This is a card that's going to stay in my wallet."
Chockstone also enables merchants to sell advertising space printed on their receipts. Mr. Lipp said he is touting this service to issuers, and that a "major issuer," which he would not name, is planning to test the service.
Since Chockstone's loyalty software collects payment information taken at the point of sale, it can determine which issuers' cards are being used.
Banks can use the ads on receipts to offer rewards to their customers or try to reach new ones, he said. For example, a receipt could reward the issuer's customers with a coupon or extra loyalty points, or notify noncustomers that such coupons and rewards would be available to them, if they switched credit cards.
"You can even help position a certain issuer over another issuer at the point of sale," Mr. Lipp said.
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said Chockstone and Peppercoin are a good fit.
Though Peppercoin has tried for years to appeal to online merchants and others that wanted to lower the cost of taking card transactions, its loyalty software has been most appealing to traditional merchants, "because there's a clear top-line value proposition," Mr. Schatt said.
"The real market is everyday merchants … that are looking for ways to get their customers to come back more often," he said.
Banks should take advantage of Chockstone's advertising program, because "loyalty and rewards and prepaid is the key middle ground between issuers and merchants," he said. "More and more consumers are looking to maximize their rewards."
