LevelUp has re-emerged in the headlines thanks to increasing collaboration with JPMorgan Chase and a fresh round of $50m in funding. The recent activity has revealed that LevelUp is not only still a relevant player, but has almost completely pivoted its business to the white-label mobile wallet platform strategy it first unveiled in late 2012. Here, we provide an update on LevelUp's platform play and its go-forward roadmap.
LevelUp's strategy has evolved since its inception. Over the past few years it has been quietly building up a mobile wallet platform business in the QSR vertical. This white-label approach is now its primary focus, and has seen promising traction. LevelUp's customer base is expanding, and while predominately made up of smaller restaurants, it is dotted with several multi-hundred location chains. With investments in order-ahead integration and deepening customer-engagement capabilities, LevelUp is hoping to move further upmarket to do business with multi-national QSRs that count their locations in the thousands. This will be no small leap, but the fresh round of funding gives LevelUp more runway to not only invest further in its platform's feature set, but in the sales and operational strategies required to do business with more complex organizations.
LevelUp's strategy has evolved since its inception. Over the past few years it has been quietly building up a mobile wallet platform business in the QSR vertical. This white-label approach is now its primary focus, and has seen promising traction. LevelUp's customer base is expanding, and while predominately made up of smaller restaurants, it is dotted with several multi-hundred location chains. With investments in order-ahead integration and deepening customer-engagement capabilities, LevelUp is hoping to move further upmarket to do business with multi-national QSRs that count their locations in the thousands. This will be no small leap, but the fresh round of funding gives LevelUp more runway to not only invest further in its platform's feature set, but in the sales and operational strategies required to do business with more complex organizations.
Context
Founded in 2008, Boston-based LevelUp launched in 2011 with a mobile payment, loyalty and rewards application for in-store purchases. It later augmented its position in September 2012 with the release of a white-label version of its wallet platform targeted at SMB restaurants.
LevelUp is well-funded, having raised north of $100m, including a $10m round in 2016 led by JPMorgan Chase and its recent – and largest – round of $50m in May, with participation from JPMorgan Chase, CentroCredit Bank and wealth management firm U.S. Boston. Additional investors in the company include by GV (Google Ventures), Balderton Capital, T-Ventures (venture capital arm of Deutsche Telekom), Highland Capital Partners, Dreamit, Bantam Group, Continental Investors and Transmedia Capital.
LevelUp has seen a significant increase in headcount in recent years, having jumped from 85 when we last covered it in late 2015 to 150; about 125 of those employees are based in Boston. The company's hiring spree is continuing, with about 30 open positions.
LevelUp has not provided an update on the scale of its user base since May 2014, when it revealed it had 14,000 merchants in its network and 1.5 million consumer users, but has shared that it now has one million monthly active users (MAUs). The size of LevelUp's ecosystem, while still important, has become a secondary focus for the company. The majority of its strategy and resources are now focused its platform play, where it has deployed its SDK across more than 250 applications – about twice as many as it had in 2015.
Products
LevelUp provides an integrated payment, rewards and loyalty application platform for Android and iOS. The platform is designed for merchants to deploy a white-label mobile commerce app centered on customer engagement and in-store purchases.
LevelUp has an in-house agency team capable of building and designing apps from the ground up, but also provides an SDK for merchants preferring to insert LevelUp's functionality into an existing app via integrations with partners such as Urban Airship, Appboy, Mogean and Popdeem. Both the agency and SDK approaches tap into LevelUp's network, meaning users of the LevelUp open-loop wallet can leverage their same login information and payment credentials across all apps in LevelUp's ecosystem.
LevelUp operates as 'merchant of record' and its platform supports QR code-based payments at the point of sale (POS) via more than 50 POS integration partners, such as Toast, Revel Systems, Clover Connect, POSiTouch, Oracle/Micros, NCR Aloha, Microsoft Dynamics and Cayan. LevelUp has also augmented its platform with order-ahead capabilities through integrations with partners like Foodler and Delivery.com. The vendor has enlisted payment processor Braintree to store and tokenize all credit and debit cards used across its platform. Aside from card payments, LevelUp also offers a digital gift card service that can be integrated within the app.
At the crux of LevelUp's platform is a comprehensive set of customer engagement tools. Merchants can run a variety of self-service campaigns, both pre-designed and custom, through their app focused on customer acquisition and re-engagement. The campaigns are intended to drive behavior by offering users free credit to put toward a purchase. They can be designed around a variety of factors, including location, spending and frequency of visits. Merchants have access to an analytics dashboard where they can view detailed CRM information on each user's purchase behavior, as well as monitor the success of their campaigns, provide credit to users and view historical performance across locations.
Strategy
LevelUp's platform play is focused on QSRs, with the major of its customers having fewer than 25 locations. It has shown an ability to attract fast-growing QSR concept brands, noting its clients make up nearly 20% of the restaurants in FastCasual's 2016 Top 100 Movers and Shakers list. Apps can be built and deployed quickly, with two to three months from mockup to a functional app not uncommon.
LevelUp is seeing some traction further upmarket, recently adding Tropical Smoothie Café as its largest merchant, with some 500 locations. Other large customers with several hundred locations include Potbelly Sandwich Shop and Steak & Shake. In the longer term, LevelUp aspires to work with enterprise-sized QSRs that measure their locations in the thousands. LevelUp's focus for the near future will continue to be in the US and on on restaurants, although it is willing to entertain adjacent verticals such as convenience and grocery.
A typical project can range from $20,000 to $60,000 per app OS dependent upon the level of customization, with additional hourly fees for out-of-scope work. As with its own wallet, LevelUp generates revenue when its merchants run campaigns. Traditionally, it has taken a 25% cut of all credit redeemed by users through the campaigns it runs on behalf of merchants. However, it is beginning to pivot more toward a monthly fee model, which is says resonates better with larger merchants.
LevelUp continues to make a big push into order-ahead and views it as a highly strategic initiative. It has built integrations into several platforms that have provided it with access to some 308,000 restaurant locations. These integrations allow for order-ahead capabilities within LevelUp's own app, but also provide ease of deployment for white-label customers wishing to bring order-ahead into their own branded experience. LevelUp's broad order-ahead network is one of the main attributes that attracted Chase to partner with – and invest in – LevelUp. The deal has allowed Chase to bring LevelUp's network of order-ahead merchants into its Chase Pay mobile wallet.
There are admittedly challenges with LevelUp's approach to order-ahead. Because it is building integrations with the platform providers and not the merchants themselves, this can lead to customer experience issues and operational issues for merchants that may not necessarily be aware that orders are being initiated via LevelUp.
Competition
LevelUp has carved out something of a sweet spot by focusing on smaller QSRs, given that the overwhelming majority of wallet platform and technology providers remain focused further upmarket. With that said, LevelUp aspires to court larger merchants and will increasingly be competing with a number of players that have cut their teeth on large QSR deals. CARDFREE is a major player in this regard, having played a role in the deployment of high-profile QSR wallets including Dunkin' Donuts, Taco Bell and Checkers. Paydiant, although quiet since its 2015 acquisition by PayPal, is another notable wallet platform provider with deployments with SUBWAY and Orange Leaf. Interestingly First Data has also dabbled with wallet deployments, serving as the technology provider behind the Chick-fil-A wallet.
More traditional players that have focused on banks – namely Gemalto, G&D, Oberthur Technologies and Rambus – are also beginning to explore new verticals such as retail and grocery, with QSR not out of the question. In some ways providers more focused on mobile marketing, such as Appboy and Urban Airship, can also be viewed competitively, but their capabilities do not extend to payments.
Founded in 2008, Boston-based LevelUp launched in 2011 with a mobile payment, loyalty and rewards application for in-store purchases. It later augmented its position in September 2012 with the release of a white-label version of its wallet platform targeted at SMB restaurants.
LevelUp is well-funded, having raised north of $100m, including a $10m round in 2016 led by JPMorgan Chase and its recent – and largest – round of $50m in May, with participation from JPMorgan Chase, CentroCredit Bank and wealth management firm U.S. Boston. Additional investors in the company include by GV (Google Ventures), Balderton Capital, T-Ventures (venture capital arm of Deutsche Telekom), Highland Capital Partners, Dreamit, Bantam Group, Continental Investors and Transmedia Capital.
LevelUp has seen a significant increase in headcount in recent years, having jumped from 85 when we last covered it in late 2015 to 150; about 125 of those employees are based in Boston. The company's hiring spree is continuing, with about 30 open positions.
LevelUp has not provided an update on the scale of its user base since May 2014, when it revealed it had 14,000 merchants in its network and 1.5 million consumer users, but has shared that it now has one million monthly active users (MAUs). The size of LevelUp's ecosystem, while still important, has become a secondary focus for the company. The majority of its strategy and resources are now focused its platform play, where it has deployed its SDK across more than 250 applications – about twice as many as it had in 2015.
Products
LevelUp provides an integrated payment, rewards and loyalty application platform for Android and iOS. The platform is designed for merchants to deploy a white-label mobile commerce app centered on customer engagement and in-store purchases.
LevelUp has an in-house agency team capable of building and designing apps from the ground up, but also provides an SDK for merchants preferring to insert LevelUp's functionality into an existing app via integrations with partners such as Urban Airship, Appboy, Mogean and Popdeem. Both the agency and SDK approaches tap into LevelUp's network, meaning users of the LevelUp open-loop wallet can leverage their same login information and payment credentials across all apps in LevelUp's ecosystem.
LevelUp operates as 'merchant of record' and its platform supports QR code-based payments at the point of sale (POS) via more than 50 POS integration partners, such as Toast, Revel Systems, Clover Connect, POSiTouch, Oracle/Micros, NCR Aloha, Microsoft Dynamics and Cayan. LevelUp has also augmented its platform with order-ahead capabilities through integrations with partners like Foodler and Delivery.com. The vendor has enlisted payment processor Braintree to store and tokenize all credit and debit cards used across its platform. Aside from card payments, LevelUp also offers a digital gift card service that can be integrated within the app.
At the crux of LevelUp's platform is a comprehensive set of customer engagement tools. Merchants can run a variety of self-service campaigns, both pre-designed and custom, through their app focused on customer acquisition and re-engagement. The campaigns are intended to drive behavior by offering users free credit to put toward a purchase. They can be designed around a variety of factors, including location, spending and frequency of visits. Merchants have access to an analytics dashboard where they can view detailed CRM information on each user's purchase behavior, as well as monitor the success of their campaigns, provide credit to users and view historical performance across locations.
Strategy
LevelUp's platform play is focused on QSRs, with the major of its customers having fewer than 25 locations. It has shown an ability to attract fast-growing QSR concept brands, noting its clients make up nearly 20% of the restaurants in FastCasual's 2016 Top 100 Movers and Shakers list. Apps can be built and deployed quickly, with two to three months from mockup to a functional app not uncommon.
LevelUp is seeing some traction further upmarket, recently adding Tropical Smoothie Café as its largest merchant, with some 500 locations. Other large customers with several hundred locations include Potbelly Sandwich Shop and Steak & Shake. In the longer term, LevelUp aspires to work with enterprise-sized QSRs that measure their locations in the thousands. LevelUp's focus for the near future will continue to be in the US and on on restaurants, although it is willing to entertain adjacent verticals such as convenience and grocery.
A typical project can range from $20,000 to $60,000 per app OS dependent upon the level of customization, with additional hourly fees for out-of-scope work. As with its own wallet, LevelUp generates revenue when its merchants run campaigns. Traditionally, it has taken a 25% cut of all credit redeemed by users through the campaigns it runs on behalf of merchants. However, it is beginning to pivot more toward a monthly fee model, which is says resonates better with larger merchants.
LevelUp continues to make a big push into order-ahead and views it as a highly strategic initiative. It has built integrations into several platforms that have provided it with access to some 308,000 restaurant locations. These integrations allow for order-ahead capabilities within LevelUp's own app, but also provide ease of deployment for white-label customers wishing to bring order-ahead into their own branded experience. LevelUp's broad order-ahead network is one of the main attributes that attracted Chase to partner with – and invest in – LevelUp. The deal has allowed Chase to bring LevelUp's network of order-ahead merchants into its Chase Pay mobile wallet.
There are admittedly challenges with LevelUp's approach to order-ahead. Because it is building integrations with the platform providers and not the merchants themselves, this can lead to customer experience issues and operational issues for merchants that may not necessarily be aware that orders are being initiated via LevelUp.
Competition
LevelUp has carved out something of a sweet spot by focusing on smaller QSRs, given that the overwhelming majority of wallet platform and technology providers remain focused further upmarket. With that said, LevelUp aspires to court larger merchants and will increasingly be competing with a number of players that have cut their teeth on large QSR deals. CARDFREE is a major player in this regard, having played a role in the deployment of high-profile QSR wallets including Dunkin' Donuts, Taco Bell and Checkers. Paydiant, although quiet since its 2015 acquisition by PayPal, is another notable wallet platform provider with deployments with SUBWAY and Orange Leaf. Interestingly First Data has also dabbled with wallet deployments, serving as the technology provider behind the Chick-fil-A wallet.
More traditional players that have focused on banks – namely Gemalto, G&D, Oberthur Technologies and Rambus – are also beginning to explore new verticals such as retail and grocery, with QSR not out of the question. In some ways providers more focused on mobile marketing, such as Appboy and Urban Airship, can also be viewed competitively, but their capabilities do not extend to payments.
Strengths
LevelUp has built a comprehensive and easy-to-deploy mobile payment and customer engagement platform that is uniquely focused on smaller QSRs. It has built out an impressive list of POS and order-ahead integrations.
Weaknesses
LevelUp's platform has not yet been 'battle tested' by more complex QSRs that measure locations by the thousands. As LevelUp invests more on its platform strategy, it must divert resources and focus from its own open-loop wallet.
Opportunities
LevelUp's growing success with multi-location QSRs demonstrates its ability to move further upmarket. Adjacent verticals, such as grocery and convenience, offer growth and diversification opportunities.
Threats
As LevelUp moves further upmarket, it will encounter a variety of experienced competitors. LevelUp's customer base is highly concentrated.
Jordan McKee
Principal Analyst, Payments
Jordan McKee is a Principal Analyst leading 451 Research’s coverage of the payments ecosystem. He focuses on digital transformation across the commerce value chain, with an emphasis on the major trends impacting payment networks, issuing and acquiring banks, payment processors and point-of-sale providers. His research helps vendors and enterprises assess the key implications of emerging technologies driving the digitization of the end-to-end shopping journey.
Sheryl Kingstone
Research Director, Customer Experience & Commerce
Research Director Sheryl Kingstone focuses on improving the customer experience across all interaction channels for customer acquisition and loyalty. She helps operator and enterprise clients make decisions regarding the use of technology, business processes and data to boost revenue and optimize business performance. She also assists vendors with custom research projects, messaging and positioning, as well as product road map evaluations. Kingstone researches and writes on the top trends in mobile marketing and commerce along with cross-channel customer experience technologies.
Keith Dawson
Principal Analyst
Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology. Keith has been covering the intersection of communications and enterprise software for 25 years, mainly looking at how to influence and optimize the customer experience.