St. Louis may not be the obvious launching spot for payment technology, but Radnor, Pa.-based FreedomPay bypassed the nation's most crowded cities to instead launch the Vibe mobile wallet in the Show-Me state.

Mobile wallet providers could create an all-encompassing ecosystem in less-populated areas, where it's easier to outfit merchants and consumers and plaster the airwaves and billboards with marketing materials, says Jim Van Dyke, CEO of Javelin Strategy and Research.

Arkady Fridman, a senior analyst at Boston-based Aite Group, agrees. Competition is fierce from larger wallet providers in cities like New York, Chicago and San Francisco. The St. Louis metropolitan area is the 15th-largest metropolitan area in the U.S. with almost 3 million people, and is a good choice for FreedomPay, which is new to the wallet space, Fridman says. By comparison, New York City alone has 8.2 million residents, according to 2011 census data.

“Most consumers and smaller merchants don’t know what a mobile wallet is, nor do they know who offers one,” he says. “As such, Vibe has a great chance to gain consumer mindshare and to capture the sole proprietor and SMB merchant base by showcasing their wallet capabilities.”

With Vibe, FreedomPay is taking advantage of quick-response (QR) codes, which work with nearly any smartphone. This technology allows merchants to implement mobile payments without the costly point-of-sale (POS) hardware upgrades associated with other payment methods, Fridman says.

But consumers in the Midwest region will likely be looking for technology based on practical value instead of novelty, says Van Dyke.

“Something in the Midwest that’s been really successful is the idea of the referral,” says Andrea Walden, vice president of marketing for FreedomPay. “Our merchant customers all talk to each other; they’re friends and all kind of know each other.”

This Midwestern hospitality has been helpful for the 12-year-old company that came to market with a stored-value card for college students.  

“There’s always that [word-of-mouth] opportunity, but in smaller towns it certainly carries more weight,” Walden says. “More businesses rely on each other in small towns.”

For example, Companion Bakery, which accepts Vibe, has three locations in the greater St. Louis area and sells bread to more than 200 restaurants and cafes. Companion Bakery did not respond to inquiries.

Another characteristic FreedomPay looked for was a large number of universities, which bring a population of tech-savvy consumers, Walden says.

“Universities can be good bellwethers of important future adoption patterns,” says Van Dyke, in an email. “Payments are very much about innovation, and the mix of a Midwest locale with a university setting is an interesting combination."

Before launching in St. Louis, FreedomPay had to consider several things companies that launch in bigger cities might not need to think about, says Walden. For example, the company had to build a method for consumers without smartphones to use the service. It created a way for consumers to use their mobile phone number as an identifier.

When marketing, FreedomPay also focused more heavily on radio advertisements and local media, such as newspapers, Walden says. These advertisements “would probably get lost in the shuffle in a big city, but those outlets are more visible in a smaller city,” she says.

Smaller populations have long had a big influence on payment trends, Van Dyke says, giving the example of Bank of America’s launch of the Bank Americard in the farm town of Fresno in the late 1950s. "New payment methods have some fairly middle-America roots,” he says.

Other cities that fit FreedomPay’s needs are Burlington, Vt. and Oklahoma City, Walden says. Places that use FreedomPay's stored value product will also see the Vibe wallet soon, she says. These include the Robert Wood Johnson University Hospital in New Brunswick, N.J. and the University of Arts in Philadelphia.

In St. Louis, a couple thousand consumers have downloaded the app, says Walden. Merchants signed on to accept the mobile wallet include Sam’s Pizza, Café Brava and Chandler Hill Winery.

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