SCVNGR's LevelUp is targeting a broader audience for its mobile-payment system by working with the prepaid card marketer NetSpend Holdings Inc. The partnership represents new territory for both companies.

Since mobile payment systems require a funding source, they have been focused primarily on bank customers, who have a credit or debit card on hand to link to the mobile wallet. Prepaid cards are typically used by the underbanked, who are often perceived as being of lower socioeconomic status than bank customers, says Ben Jackson, senior analyst at Mercator Advisory Group.

"This gives LevelUp the opportunity to reach into an income segment and market niche that's probably not immediately obvious for them but could be a significant benefit," Jackson says.

NetSpend says its customers are already active users of the mobile features it offers today, but not of mobile payments.

"Our customers are very mobile-savvy," Trevor Erxleben, NetSpend's senior vice president for partner channel, said in an email. "They use our mobile features regularly."

These features include balance inquiries and person-to-person transfers. NetSpend's mobile services are not focused on point of sale payments.

"With respect to purchases and payments in particular, mobile represents a very small percentage of the total today," Erxleben says. With the LevelUp partnership, "we certainly expect that percentage to grow," he says.

Cardholders that link their NetSpend prepaid card to LevelUp accounts receive a $10 incentive to use at any of the more than 3,000 merchants accepting LevelUp, which supports payments from a quick-response (QR) code displayed on a phone's screen or an embedded Near Field Communication chip.

"We've always looked at mobile payments as something everyone should be able to embrace, without restriction," says Matt Kiernan, marketing manager at LevelUp. "Through the partnership with NetSpend, we're providing consumers who may not have a credit card or debit card the convenience of paying with their phone and earning rewards."

Jackson says the number of merchants accepting LevelUp is not substantial enough to guarantee an overlap with NetSpend's audience.

If SCVNGR's LevelUp can reach prepaid cardholders by tailoring its offers to them, Jackson says the relationship makes sense since most of the underbanked population owns smartphones capable of using LevelUp.

Other companies are seeing potential to market mobile wallets to prepaid cardholders. This week, DeviceFidelity Inc. and TransCard LLC launched a mobile prepaid MasterCard. Green Dot, a rival prepaid card provider, provides card art to Google to help users enroll Green Dot prepaid cards with the Google Wallet mobile-pay system. 

NetSpend and Green Dot both face competition from American Express, which recently launched its BlueBird card with Wal-Mart Stores. Amex also has a digital wallet, called Serve, which it ties to a prepaid card for spending in brick-and-mortar stores.

Jackson says, Green Dot prepaid cardholders could also link their cards with LevelUp, but they won't get a $10 incentive.

"It's more a merchant incentive" than a truly integrated mobile-pay system, Jackson says. "Not to say it's a bad or ineffective thing, but what we're looking at is a fairly easy marketing plan LevelUp could replicate to other financial institutions and card companies."

If the NetSpend campaign succeeds, LevelUp could use it as evidence to try and build other partnerships, not solely focusing on the prepaid market, notes Jackson.

"We're constantly working to make LevelUp the most seamless mobile payments and loyalty solution for consumers and businesses alike and we continue to look for opportunities to further that goal," Kiernan says. 

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