There’s a new way to pay on Capitol Hill — all you need to do is whip out your smartphone. LevelUp has made its way into the neighborhood and is looking to make your credit card irrelevant.
“We love it, we like it way more than the credit card companies,” said Joanne Hong at 12th Ave’s Chatterbox Cafe, who started using the LevelUp service last month. “They don’t charge us like crazy with transaction fees like the credit card companies do.”
LevelUp is an iPhone, Android, and Blackberry app that turns your phone into a futuristic payment method. Once you download the app, you link a credit or debit card to a unique QR code (those little weird black and white boxes) on your phone that scans at participating retailers. Not only is LevelUp hoping you’ll like how easy the app makes it to pay, they have also teamed up with retailers to give you incentive to keep paying with the app.
Retailers can set up $5, $10, or $20 free first time credit for people using LevelUp in their store as a way to get you to try new places. Retailers can also set up a loyalty rewards system, deals like “Spend $X, get $Y free” that will live update on your phone every time you use the app to pay. LevelUp also makes tipping easier, giving you a sliding tip percentage scale you can select by tapping your finger.
While LevelUp was originally only usable in Boston, New York, Philadelphia and San Francisco, the app mades its way into Seattle a little over a month ago.
LevelUp isn’t the only one trying to make cash registers irrelevant. Square, a startup created by Twitter-founder Jack Dorsey, is an app that effectively turns an iPhone or iPad into a payment service. By attaching a peripheral into the headphone jack, your device can accept credit card payments. While the peripheral and app are free, Square charges 2.75 percent on every credit card transaction. Last year Square had over 500,000 users and was processing $3 million a day. On Capitol Hill though, Square just lost a customer.
Blue Moon Burgers, which originally opened using the Square on iPads, recently switched back to cash registers. “It didn’t work at all,” said an employee at Blue Moon. “Orders and payments weren’t going through. We had to hand write orders and take them back all the time because cooks weren’t getting them. iPads just weren’t made for restaurants.”
One of the incentives for small businesses to use LevelUp is that the app doesn’t charge retailers with any service fees. Beyond just saving businesses money, the app allows businesses to set up “campaigns” that will alert customers about special deals through LevelUp, sort of like a more direct Groupon.
These “campaigns” are how LevelUp makes its money and gets away without charging transaction fees. When customers take advantage of deals like “$10 free credit for first time customers” or loyalty campaigns like “$20 free when you spend $100,” LevelUp charges 35 cents for each dollar of campaign credit used by the customer.
For instance: say a campaign drives a new customer to a business with a $2 incentive. The customer spends $10. The business funds the $2. LevelUp charges an additional $0.70 for having delivered the new customer.
Hong said that while LevelUp hasn’t taken off as quickly with the older crowd, young people have been embracing it.
“Before the school year ended, it was getting used more frequently,” Hong said. “It’s slowed down a lot now.”
Z Pizza has been surprised with how often people seem to be latching on to the service. During its first week, Z Pizza had a “$10 free credit” deal for in store purchases and deliveries, which boosted their customer counts.
“People use it a surprising amount,” Molly Gentry of Z Pizza said. “We probably get at least 10 regulars who use it. We’ve had people sign up for it on the spot if they forget their card but know their info, which has been useful.”
Even though the app has helped Z Pizza, Gentry said that businesses hasn’t shot up too drastically because of LevelUp. While the free credit deals seem to be drawing in customers, everyone isn’t on board yet. Roman Dilorenzo, a server at Manhattan, said that people have used the service only twice over the entire month the restaurant has been using it.
“I can’t speak for the other servers, but it’s been really rare for me,” Dilorenzo said.
You can find a map of participating Seattle LevelUp retailers here.