Gift and loyalty services company SparkBase LLC is using $3 million in new funding to hasten the development and deployment of its technology platform and mobile services, which includes a smartphone application that enables consumers to quickly enroll in merchant-loyalty programs.
The investment comes when mobile loyalty is becoming more ubiquitous thanks to efforts from companies such as Groupon Inc., Shopkick Inc. and. perhaps more significantly, Google Inc. and its just announced mobile wallet, observers say, (
“It’s no secret what’s going on out there,” John Heaney, SparkBase brand director, told PaymentsSource in an interview. “Anyone can take a look at the market and see where it was headed. That was the impetus behind the funding–to propel the development and deployment of the technology.”
North Coast Angel Fund, the Ohio TechAngels and Blue Olive Partners LLC are the three investment firms providing the funding.
Indeed, mobile loyalty is becoming a primary focus in the payments industry, Todd Ablowitz, the president of the payments consulting firm Double Diamond Group, told PaymentsSource in an interview.
“The wild, surprising success of Groupon has captivated everyone,” Ablowitz said. “Groupon is building on the idea to create more value and create more deals locally.”
PayCloud represents a similar concept for SparkBase.
Consumers use PayCloud to join merchant-loyalty programs in a given area, Heaney explained. They choose programs to join based on a map that shows which merchants use PayCloud. Consumers then are able to receive coupons and promotions merchants send using an online platform.
PayCloud also stores any pertinent information related to the program, including reward points, Heaney said. The free app is available for Apple Inc.’s iPhone and phone running on Google’s Android mobile operating system.
Consumers may redeem coupons and points at brick-and-mortar locations through a proprietary device SparkBase sells to merchants for between $30 and $50, according Heaney. The device is a sensor about the size of an iPhone that plugs into a merchant’s point-of-sale terminal. Users open the PayCloud app and wave their phone near the sensor to interact with the device over an encrypted signal, Heaney explained.
The signal is not enabled using Near Field Communication technology, Heaney said. He declined to reveal what powers the proprietary technology.
SparkBase worked with Palo Alto, Calif.-based technology company Naratte Inc. to develop the system.
SparkBase introduced PayCloud in April at the annual Electronic Transactions Association conference. It plans to test the loyalty service later this month with some 36 merchants throughout the Midwest. Heaney declined to reveal the merchants.
Merchants may add PayCloud through their independent sales organization partnerships. SparkBase deals exclusively with merchant acquirers, which offer different services packages and pricing to businesses, Heaney noted.
SparkBase plans to add a payment component, but the company believes consumers will be slow to ditch plastic in favor of phones for purchases, Heaney said.
Heaney believes Google might have some problems changing consumer payment behavior. Still, the gift and loyalty aspect of Google Wallet validates the programs SparkBase developed the past five years, he said.
“Offer and coupons are what lures consumers” to try any system, Heaney added.
SparkBase might have an advantage with its system because the company has developed strong programs for smaller merchants, Ablowitz said. “They have found a model that seems to work really well and adding mobile is pretty obvious next step,” he added.
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