Apple Pay’s struggles to build its user base are nothing compared with the labors of Sionic Mobile, which has been on a six-year odyssey of inventing and reinventing its mobile payments app.
Undaunted, the Atlanta-based company this week launched a fresh iteration of its ION Loyalty app, which remains at the center of a business strategy that the company’s CEO Ron Herman admits has shifted several times since the company’s launch in 2010.
What’s noteworthy is that during its half-decade of evolution, Sionic has built sturdy relationships with 300 national merchants, including Lowe’s, and hundreds of small, independent businesses.
That persistence alone underscores merchants’ abiding interest in mobile technologies that include robust loyalty features, something Apple Pay and many of its rivals lack.
“What we’ve learned over the years is that most businesses are small operations run by a one or two-person team, and they’re looking for mobile payments to do a whole lot for them,” Herman said.
Sionic’s newest approach, a refinement on previous efforts, targets small businesses with a new way to market offers and drive loyalty with free advertising. Its system also gathers data about customer experiences.
This time around, Sionic also is touting new, lower transaction processing fees through a deal it recently cut for transaction processing with JPMorgan Chase & Co. Merchants pay a flat rate of 1% for each purchase with its app, Herman said. Sionic also promises to cover any chargebacks merchants experience.
In prior years, Sionic tried targeting banks that might extend its service to merchant customers, and for a time it was integrated with Google Wallet, a predecessor to Android Pay, when that concept’s primary focus was mobile payments.
At one time Sionic also aimed to generate nonprofit donations from consumers’ mobile payments, and last year it introduced an approach to mobile authentication using selfies taken with a smartphone camera.
One of Sionic’s biggest challenges is the same issue that plagues other mobile payments startups—the need to generate awareness and scale.
Sionic’s user base is relatively small, but Herman doesn’t compare Sionic’s reach to a giant like Starbucks, whose rewards program has 11 million regular users. “Our success is based on frequency of use, and getting repeat sales for local businesses,” he said.
Sionic has a two-pronged growth strategy. One is word of mouth in local markets where merchants are using its app, aided by ION Loyalty’s in-app feature alerting shoppers to other participating merchants and the deals they’re touting. Typical offers are 2% to 5% of the purchase back in ION points.
Another way to expand is by encouraging retail wholesalers and distributors to use Sionic Mobile for business-to-business purchases, taking advantage of the lower transaction costs and protections Sionic provides for mobile payments. Those companies, in turn, help spread the app to other audiences, Herman said.
Sionic’s smartphone-based ION Loyalty app enables businesses to accept payments using a three-digit code the app generates for payments linked to a stored credit or debit card. Participating businesses choose how many ION points they want to offer customers as a reward for purchases, and each set of 1,000 ION points is worth $1 toward a purchase at any participating business.
The option to use points at other businesses is key, Herman said. “A reward is exponentially more valuable if it’s currency a customer can use elsewhere,” he said, pointing to the rise of coalition-based loyalty programs like Plenti.
Sionic’s app now has a bundle of features to help small businesses drive traffic, including a tool to create free, in-app advertisements. Merchants can create their own ads for products, services and special offers within the app, using prefabricated artwork and ads.
The company is also rolling out a way for small businesses to generate data from consumers, by providing a platform for users to click to review participating businesses’ products and services.
“Our focus now is onboarding merchants, and we think this time we have a way that will expand scale exponentially, as business partners spread the word to one another,” Herman said.