More than 3,000 merchants have signed up to use an alternative mobile phone-based loyalty scheme called Paycloud from SparkBase Inc. that may eventually include a mobile-payment element, the company says.
The Cleveland-based loyalty and prepaid platform provider has planned Paycloud’s official launch for Oct. 27 but already has shipped 500 sensors to merchants and has received orders for another 2,500, which it plans to deliver within three weeks, John Heaney, the company’s brand director, tells PaymentsSource.
To use Paycloud, merchants visit a SparkBase Web portal to create loyalty offers and select customers to receive the offers, Heaney says.
Offers might range from a free cup of coffee at a diner to a discounted haircut at a salon, he notes. In his example, the target audience might include the 50 customers who come in most often on Tuesdays or everyone who has not been in for two weeks.
Consumers who have downloaded the Paycloud application receive the offers on their cellular phones, which need not be smartphones, Heaney says.
To accept the offers, consumers go to the merchant location and tap their cell phones on a sensor plugged into a payments terminal, he says, noting that SparkBase sells the sensors for $50 each. The sensors use ultrasound signals, not NFC, to transmit messages, and they operate on software called Zoosh from Naratte Inc.
Merchants pay a monthly fee for the service, which Heaney calls “nominal,” and it varies because independent sales organizations offering the service determine their own markup. ISOs can tie training and support to the fees to add value, he says.
SparkBase does not take a cut of the monthly fees but benefits when transaction volume increases because of the loyalty programs, says Heaney.
A subsequent version of the product may accept payments but the initial offering does not. Studies indicate the public has little incentive to switch from paying with cards to paying with phones, but many consumers appreciate the convenience of using phones to collect and redeem loyalty offers, he says.
The average family is juggling 18 loyalty cards and has no convenient way to check the status of their points or offers, says Heaney.
Even with the added convenience of consolidating loyalty schemes in a cell phone, Paycloud may have a relatively short life span because Near Field Communications technology that will likely combine payments with loyalty schemes are
poised to spread soon, observers say. Many believe NFC technology represents the future of contactless mobile payments and marketing.
“There’s a window for this. It’s just that it’s a small window,” says analyst Gil B. Luria, senior vice president at Los Angeles-based Wedbush Securities LLC.
NFC will not become ubiquitous for three years, Heaney maintains, but Luria views the timing as more immediate.
By the end of next year, most new smartphones reaching the market will contain NFC chips, he says. “With a few million, it’s compelling,” he says of NFC-enabled phones.
As early as this month, a dozen major U.S. retailers plan to begin promoting an NFC-powered Google wallet, Luria notes. With 150,000 payments terminals already accepting NFC, adoption should get under way soon, he says.
Still, Luria calls Paycloud an “interesting product” and notes its value may reside in software that provides good loyalty schemes. “They will have to sell that aspect,” he says of the software.
A month-long Paycloud beta test that ended in July put the sensors in the hands of some 20 merchants, while “street teams” lined the sidewalks in fashionable neighborhoods to promote the application to passing consumers, Heaney says.
The Paycloud fundamentals did not change as a result of the test, but the product became “cleaner, simpler and easier to use,” he says.
SparkBase does not plan to allow ISOs to sell Paycloud under any other name because it is seeking to establish a national brand.
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