Sionic Mobile, an Atlanta-based start-up that in June launched a mobile merchant-loyalty initiative in that city, is providing extra reward points to consumers to get them to use a Dwolla account for their spending.
Sionic Mobile's plan for growth relies heavily on its ability to influence consumers' spending behavior, steering them away from conventional payment cards in favor of Dwolla's alternative payment system.
It does this to cut costs for merchant participants; in December, Des Moines, Iowa-based Dwolla eliminated its 25-cent transaction fee for purchases that are $10 or less.
To this end, Sionic offers 50% more loyalty points, or "Ions," to consumers that use Dwolla to complete purchases at participating merchants. One thousand Ions equals $1.
"We're trying to help merchants cut or eliminate their processing fees," Bob Burroughs, Sionic Mobile's vice president and product manager, said in an interview. "We're trying to bring some added value to the merchants, and if we can bring value through Dwolla, that's good for everybody."
In another move to attract merchants and keep them satisfied with its loyalty system, Sionic rewards consumers for referring new merchant clients. Sionic calls those consumers "pIONeers," and it gives them extra Ions each time any participating consumer uses the Ion Loyalty app to shop at a referred store.
There is no cost to participate in Sionic's loyalty program, Burroughs says. Merchants pay Sionic 5% of the amount of their Ion Offer. For example, if a merchant offers $10 worth of Ions toward a $30 purchase, Sionic receives 5% of the offer price, he says.
Merchants also can buy Ions that they can include with specific Ion Offers. In doing so, they can avoid discounting the product's posted price, Burroughs says.
Merchants present their Ion Offers within Sionic's mobile app, and users select them by adding the offers to a virtual shopping cart. At the point of sale, the app will identify to the merchant what's in the cart. Then users choose how to pay: with accumulated Ions or Dwolla through the app, or with cash or cards at the cash register.
Sionic's current system cannot handle split transactions, so consumers cannot use Ions to pay for part of a purchase and some other payment form to cover the rest, Burroughs says.
Sionic plans to focus on growing the loyalty program in the Atlanta area before venturing into other communities, he says
Fashionaid Cleaners in Atlanta is among the first to support the Ion Loyalty initiative. Sun Chong "Christine" Pak, who owns the store, said in an interview she began participating about two weeks ago in what she terms "a trial."
Signage in the store promotes the Ion Loyalty program, but thus far only a few customers have inquired about it. "Most are in a hurry; they're rushing in and out," she says.
Pak, who says she uses United Merchant Services to process credit and debit card payments, sees the program eventually generating more business. If it does, she plans to recommend it to her eight siblings, each of whom also operates a cleaning business.
In a news release announcing her store's participation in Ion Loyalty, Pak said that while she negotiated a good rate from United, the cost to accept traditional payment cards "has become one of our largest expenses."
"We are always looking for ways to cut costs but still offer quality service to our customers. Ion Loyalty helps us do both."
Jordan Lampe, a Dwolla spokesman, said in an interview that the company is not proactively working with Sionic. Dwolla provides an open payment platform and application programming interface, allowing any loyalty provider to build a system on top of its own.
Sionic found a niche market opportunity in Atlanta, "so all we were is the rails behind the scenes to allow them to complete the puzzle," Lampe says.
Sionic's merchant-acquisition strategy illustrates the networking aspects of what Lampe refers to as Web 2.0. "It's not business as usual out there, that's for sure," he says.