Kuapay, a Santa Monica, CA-based mobile payments startup, announced today that it’s launching in New York City with several new merchant partners including local coffee shop chain The Bean. The company’s app allows consumers to store loyalty and rewards cards and coupons, and pay at partner retailers using the Kuapay iPhone, Android or BlackBerry apps. The mobile wallet solution is already active in California, Hong Kong, Chile, Spain, Panama and Colombia, and has amassed almost 10,000 partner locations since its launch in 2010.
Similar to digital wallet apps like Lemon, consumers can add credit cards, gift cards or rewards cards to their account, and can keep track of their payment card and reward account details. Unlike Lemon, Kuapay allows users to actually pay without using their physical cards at partner merchants. Retailers can integrate Kuapay into their point-of-sale (POS) systems, so when a consumer chooses to pay with Kuapay, they scan a QR code at the register (similar to how competitor LevelUp works), then select which card they want to pay with, and approve the purchase before it’s completed. Like Lemon, users have to enter a four-digit code before they can open the app, to protect users if their phone is lost or stolen.
For individual merchants who want a mobile POS, they can download a merchant app to scan Kuapay QR codes and accept payments anywhere, similar to PayPal Here or Square, but without the hardware requirements. It offers the same mobile checkout option to larger merchants, as well as a counter checkout option with an iPod Touch for scanning QR codes.
The company is also looking to help users make secure online payments, by providing a “pay with Kuapay” option for online merchants, similar to PayPal. In the case of an online purchase, users enter a unique code generated by the mobile app, and can then choose their payment card and approve the purchase like they would in-store. Right now the online payment feature is in beta testing, and founder Joaquin Ayuso de Paul said it will be launching with partner retailers in the near future. They will also be adding NFC payments to the app, but he said they will test NFC exclusively with their transportation partners.
The Kuapay app is free for consumers, and the company charges businesses 2.09 percent plus $0.30 per transaction, though de Paul said that fee will be dropping soon. It also allows companies to add loyalty programs or send out coupons to customers for free. De Paul said that they have merchants in several verticals, including restaurants, grocery stores, and transportation, and they are working with large department stores in South America, and KFC restaurants in California. “The most successful [merchants] are restaurants and coffee shops obviously, because they’re the ones that have a clientele that is more approachable with innovation,” de Paul said, citing Starbucks’ partnership with Square as an example of how they’re open to adopting tech.
Companies like PayPal, Square and LevelUp are trying to crack the mobile payments code for businesses, with LevelUp recently doing away with merchant fees, PayPal debuting its Here reader at 2.7 percent per transaction, and Square recently debuting a flat $275 monthly plan (though merchants can still choose to pay 2.75 percent per transaction). Kuapay is trying to go beyond simply being a payment solution for merchants, and is trying to win consumers as well with its digital wallet storage, mobile payments, and loyalty features. It’s a much bigger task to win over both sides of the equation though, since Kuapay requires buy-in from both consumer and merchant, as opposed to Square which can be used with any credit card.
De Paul said that he views Google Wallet, PayPal and Square as his biggest competitors. “The difference between us and our competition is that they are trying to work with merchants who have low-volume payments, no bigger than $50,” he said. “[Using Kuapay] you’re going to be able to pay for a $5,000 TV with your phone, which is something that our competition has never approached before. The main difference is that we approach both high-end and small merchants.”
The success of the company will rely on being able to scale their merchant partners, and on those merchants pushing the payment solution to its consumers. Right now Kuapay works as a Lemon-style digital wallet, but for consumers who want to use it as a replacement for their physical wallet, it will fall short. Until Kuapay can secure a deal the size of Square’s recent deal with Starbucks, they’ll likely be a niche player in the mobile payments movement. And with competitors like Google Wallet, Square, and PayPal, it might be hard to catch up in terms of merchant and consumer adoption.