Koupah, which is providing a new point of sale card acceptance tablet, aims to offset credit card transaction fees with ads.
"If I know who is at the point of sale, then we can get advertisers to come in and subsidize the card processing fees," says Dave Merel, founder of Koupah. "If we can get rid of credit card fees, that is a dream come true for a business."
Koupah tracks customer purchases and shopping behavior. It uses this record to build a profile that informs data-driven ads and offers, which are displayed on the tablet's screen and printed on the customer's receipt. Koupah shares its commission for the ads the merchant to cover the card processing fee, which is about 2.69%. Koupah also charges three cents per transaction.
The program requires the consumer to opt in, Merel says. "We're not sharing data with retailers or the advertiser. We're just delivering the right ad to the right person."
Koupah's engine allows advertisers to target specific demographics. For example, a ski resort can present an offer to avid skiers in New York between the ages of 18 and 35. Koupah, which works mostly with restaurants in the New York area, developed most of the supporting technology in-house.
Merel did not release usage numbers for the new advertising app, saying it was still in its early stages. It's giving away three free terminals to each participating merchant, along with a cash drawer and receipt printer.
Merel also developed the Social Passport mobile app, which is a large part of what drives Koupah's model. Social Passport, which uses Near Field Communication chips and QR codes, analyzes consumer behavior to create rewards and other marketing tied to payments. It also has also social tools for consumers.
"The retailers we work with all say the social tools are great but then ask us if we can integrate that into point of sale system," Merel says. Koupah is the answer to that request.
Other point of sale providers also try to ease card fees. Revel, for example, has partnered with SCVNGR's LevelUp, which does not charge fees for card acceptance. LevelUp has gone so far as to convince at least one merchant, Rosie's Café in Lowell, Mass., to stop taking swiped card payments altogether. Revel and LevelUp did not return requests for comment by deadline.
"Merchants will take to anything creative that can lower the cost of acceptance like a duck takes to water," says Mary Monahan, executive vice president and research director of mobile for Javelin Strategy & Research.
Koupah adds "a social twist by using personalized ads and offers based on the customer's Koupah history, thus hopefully working into conversions," she says.
"The advertising model is an interesting approach," says David Kaminsky, a senior analyst at Mercator Advisors.
Placing targeted advertisements directly on the point of sale application is a relatively new practice for mobile and tablet card acceptance, he says.
A similar model is used in the grocery store industry, says Richard Crone, a payments consultant.
Catalina Marketing and inStream provide ads and coupons based on a CRM engine and consumer purchase data.
"[These companies] command the highest advertising rates in the marketplace today because they have the 'big data' that allows the advertiser to know where you are and what you just purchased when making a payment," Crone says.