Soon the question every clerk asks at checkout may not be, 'paper or plastic,' but instead, 'mobile bar code or NFC?'
SCVNGR's LevelUp, predicting a surge in payments facilitated by Near Field Communication chips built into future iPhones and other devices, is swapping out its old bar code readers to allow consumers to make payments with contactless NFC chips as well.
"There are a bunch of rumors around the iPhone 5 having NFC, so now seemed like a good time to roll out NFC-supported hardware," Seth Priebatsch, SCVNGR's chief ninja (CEO), said in an email. "I'm not convinced it will be adopted by the masses in the immediate future, but NFC is a good technology, and it's going to be around for a while."
The LevelUp system currently allows consumers to make payments by presenting a two-dimensional bar code called a quick-response (QR) code at the point of sale. Merchants scan the QR code with special readers SCVNGR provides.
The company will provide the new terminals for free to participating merchants, who already pay no fees to accept mobile payment with LevelUp's system. SCVNGR earns its revenue by charging 40 cents per dollar of credit (up from 35 cents in July to cover hardware cost) it provides customers in loyalty and incentive rewards.
The new NFC readers should be shipped to beta merchants in the next couple of weeks and to all new and existing merchants by the end of the year, Priebatsch said.
Merchants can upgrade the new hardware to support other forms of payment, such as Bluetooth 4.0. "We're not hung up on how people pay, just as long as they're using LevelUp," Priebatsch wrote.
Adding an NFC option should also address some issues with the system LevelUp uses to read QR codes. For example, there have been some user complaints about issues with the screen's brightness.
SCVNGR also plans to address these issues in software updates.
"Luckily, in iOS6 and Ice Cream Sandwich (Android 4.0), there are some ways for us to change the screen brightness dynamically on only the code screen (and then reset it when you leave) that we're looking into and should be able to roll out shortly," Priebatsch wrote.
LevelUp plans to use a new round of funding it received recently to pay for the hardware switch, he said, noting that a large manufacturing firm based in China makes the new device.
Transactions are processed securely, Priebatsch said. Instead of transmitting credit card information, a series of tokens is instantly routed from the customer through the merchant and LevelUp's servers, and finally to LevelUp's payment processors, Braintree and Bank of America, he said.
The company has "big plans" to grow LevelUp acceptance, Priebatsch said. SCVNGR reportedly has 3,500 merchant customers with 5,000 combined locations and 250,000 users.
The focus is on U.S. expansion for now, mainly in the food-services segment, Priebatsch said. Its long-term goals include international growth and a focus on other segments.
SCVNGR has its own sales team but also works closely with a number of partner organizations, including merchant acquirers, whose sales teams help bring LevelUp to their customers.
"We do share residuals on the advertising revenue we earn, which often is double or triple the residuals they'd earn off standard payment processing," Priebatsch said.