Dec. 6, 2011
A mobile comparison-shopping app that launched a digital wallet late last month says it has signed up more than 10,000 wallet users and is adding new ones at the rate of 2,500 a week in a nascent business that has attracted major players like Google Inc. and Visa Inc. “We’ll probably be one of the biggest electronic wallets by the end of the year,” predicts Alexander Muse, chief executive of ShopSavvy Inc., a 3-year-old startup based in San FLess rancisco.
The company’s wallet is part of a new version of ShopSavvy’s app, which works on both Android and Apple Inc. phones and lets users scan product barcodes to look up competing prices on merchandise they find in stores. The app’s pricing results include rival stores both nearby and online. ShopSavvy boasts more than 10 million active users, up from 1.3 million two years ago.
With the new app, version 5.0, ShopSavvy also delivers more deals and offers from local merchants to help trigger transactions, and it has included the new wallet, which the company began testing last summer in preparation for its commercial launch just before Black Friday. The wallet has simplified payment and thus boosted conversion rates, Muse says. Before, users who responded to lower prices they found on ShopSavvy grew frustrated with the process of entering payment details on merchants’ mobile checkout pages. “This [new] model allows you to do an immediate transaction and take advantage of the deal,” says Muse.
So far, some 49 retailers have agreed to accept payments from the new ShopSavvy app, and new ones are signing up at the rate of five a week, Muse tells Digital Transactions News. These include major merchants such as Buy.com and Barnes & Noble. “We haven’t done a lot of the small guys yet,” Muse says. “We’ll get to them next. We hope to be live with several hundred retailers by the end of the year.”
With the wallet, users can create an account, including credit or debit cards they want to use, and then make all subsequent purchases with a single tap on their phone screen. In a process called transcoding, ShopSavvy delivers the payment details and credentials to merchants’ front-end systems as if users had submitted the merchant’s conventional online forms. While ShopSavvy delivers the transaction to the merchant, it doesn’t process payments, stand in for the merchant, or collect a transaction fee. Instead, it charges a conventional affiliate fee, which Muse says ranges from 4% to 8% of the purchase amount. “Our real business is advertising-based,” he says. “On the payment side, you can only make about 2% [of the transaction]. We’re limited to the interchange.”
This represents a major shift from the startup’s original strategy, which involved building back-end integrations to merchants’ systems. The company was one of the first developers on the open platform PayPal Inc. unveiled two years ago, and hoped to use PayPal let users buy merchandise they settled on after checking prices on ShopSavvy’s app. But Muse says the integration work proved time-consuming for merchants that had a range of other priorities. After a year, ShopSavvy had signed just one chain, Toys R Us. “Retailers just don’t have the resources,” Muse says. So a year ago ShopSavvy began working on its transcoding approach, which links to retailers’ front-end systems instead, minimizing integration work. “We removed all the barriers,” says Muse.
ShopSavvy shifted away from PayPal, as well, Muse says. Its new wallet works only with major-brand credit and debit cards, though Muse adds, “We’ll add PayPal later.” As for debit, it’s signature debit only for now. With the Durbin Amendment having wiped out PIN debit’s pricing advantage relative to signature debit, Muse says most merchants aren’t likely to support the added work necessary to capture and secure PINs.
ShopSavvy has also dropped its former corporate name, Big in Japan Inc., in favor of the name it had given its app, and moved its headquarters from Dallas to San Francisco, though it retains its Dallas office. Last month, it announced completion of a $7 million Series A funding round led by Eduardo Saverin, one of the founders of Facebook Inc., who has joined the ShopSavvy board.
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