LevelUp, the mobile payments provider that grew out of mobile gaming startup SCVNGR, today announced an add-on round of $9 million in funding from Deutsche Telekom’s T-Venture investment arm, bringing the total for this round to $21 million ($12 million from Highland Capital Partners, Google Ventures and others was announced in June. The new cash will be used to help LevelUp continue to build out its “Interchange Zero” strategy, which does away with transaction fees for merchants using its mobile payments system.
“We’re in the middle of a huge economic shift, where paying for transactions isn’t acceptable,” LevelUp founder Seth Priebatsch said in an interview about the funding. “Our merchants expect so much more value from their payment provide than simply moving money, and we’ll be using this round of funding to continue to work on adding value for our customers. ”
The deal, and the investor involved, represents what Priebatsch characterizes as a good fit for LevelUp, because of the interests of T-Venture and where to go from here in terms of challenging other, more established players in the mobile payments space. For LevelUp, investment from a major telecom means knowledge, experience and access to the carrier side of the equation, which is a crucial one in terms of making headway against competitors like U.S. carrier joint venture Isis.
“As the investment arm of Deutsche Telekom, T-Venture was important for LevelUp to team with because they’re betting big on mobile payments,” he said. “The payment game is still early, but they bring a lot of knowledge and experience to the table as we explore even more ways to bring value to the merchant beyond the transaction.”
Back in July, LevelUp announced that it would be dropping its transaction fees for merchants on payments made through its service, and instead focusing on driving revenue via its value-add, customer acquisition and loyalty subscription offerings. So far, Priebatsch says that strategy has been paying big dividends in terms of expanding the company’s reach.
“Merchant response has been great post Interchange Zero,” he said. “We’ve doubled our new merchants month-over-month. It makes sense – why pay to move money? We’re giving companies value beyond the transaction, saving them money on the transaction and making their customers happier. Unsurprisingly, they love that.”
For LevelUp, the lure of free transactions is a significant one when compared to the fees charged by competitors like Square and PayPal. But once it has those merchants on board, it still has to sell them on the value of its add-on products. The gamble is a smart one for a smaller player looking to steal the spotlight, and this investment is a sign that key stakeholders in the mobile market think LevelUp’s likely making the right kind of moves.
