Chockstone Buys Peppercoin for its Loyalty, Aggregation Capabilities

  Chockstone Inc., a Portland, Ore.-based company that provides loyalty-marketing, stored-value processing, and credit and debit card gateway services, acquired Waltham, Mass.-based Peppercoin Inc. in April.
  Chockstone wanted to expand its services for convenience-store and quick-service restaurant customers such as Subway. "We're seeing a lot of interest [in aggregating small transactions] from the companies we work with," says Jeffrey Lipp, Chockstone CEO and president. He says Chockstone liked the way Waltham, Mass.-based Peppercoin aggregated micropayments and worked loyalty card programs into the mix.
  But it would be difficult for Chockstone to do the same without treading on Peppercoin's patents for "intelligent aggregation" technology, which allows online or point-of-sale merchants to bundle small-ticket transactions from frequent customers to minimize processing costs. And Peppercoin already had negotiated with major card networks how its aggregation processes fit within their transaction rules.
  Chockstone's acquisition of Peppercoin, along with its rule-compliant micropayment patents, solved that problem. "We have a real gem here," Lipp says. "We're excited that we're in a position where we have some good technology and some good intellectual property around [aggregation]."
  He says Chockstone plans to make equal use of Peppercoin's loyalty and micropayments expertise but will discontinue the Peppercoin name. The companies agreed not to disclose statistics such as transactions aggregated, but Lipp says the combined company now serves 30,000 merchant locations and expects to process some 250 million transactions in 2007.
  Celent LLC analyst Dan Schatt says Peppercoin was smart, but a bit late, to shift its business model from online micropayments to linking micropayments to payment and loyalty cards in the vending and brick-and-mortar world. "Had [Peppercoin] started down that road earlier, [it] could have still been independent today," he says.
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