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Summary:

Businesses interested in recreating the success of the Starbucks mobile app have a new option in Cardfree, a startup that is launching with $10 million and is led by a team that helped build the Starbucks mobile experience.

Cardfree, mobile payments
photo: Cardfree

Starbucks helped open a lot of eyes to the power of mobile payments and commerce with its Starbucks Card app, which has so far been the most successful mobile payments implementation. Now, some of the key members of that team are launching a white label tool called Cardfree that allows other businesses and merchants to take advantage of that expertise.

Cardfree launched Monday with $10 million in Series A funding from Jeffrey Katz, who founded payment processor Mercury Payments Systems. The company is looking to help businesses build out their mobile strategy by giving them a suite of tools and services so they can do more business via mobile phones, build more loyalty and get more valuable data.

Cardfree offers merchants a payments component that allows them to create digital pre-paid cards or mobile payments, which works with more than 90 percent of existing point-of-sale systems. Payments can be rendered via 2D barcodes using scanners, cloud-payments or also NFC in the future. Cardfree also provides an offers and promotions tool for delivering personalized offers and gifts to users. And there are other tools for loyalty, online recharging of pre-paid cards, ordering ahead services and data analytics.

Cardfree, mobile paymentsCardfree will work with a merchant to outfit them with the services they need. If they have a mobile app, Cardfree can augment what they have in place or they can build something from scratch.

This will compete with a host of services already in market like Square Wallet, LevelUp, Google Wallet, PayPal and others. LevelUp also has its own white label service offering merchants a branded tool for commerce.

Jon Squire, the CEO of Cardfree, said what sets the company apart is the experience the team brings to the table in executing on mobile payments and commerce. Squire, for example, led the Starbucks Mobile team as senior vice president of mobile payments at mFoundry, which developed the Starbucks app. He also launched Dunkin Donuts’ mobile payment app as CMO of Corfire. Cardfree has two other executives who helped the build Starbucks Mobile app.

“There is a desire to step on the gas for mobile by merchants, but it’s been frustrating because many don’t necessarily have deep technology teams like Starbucks,” said Squire. “Our team is borne out of people who have executed in this space and understand the pain points of integration.”

Squire also believes that merchants are wary of working with some third-party wallet services which want to share data and also build up awareness for their own brand instead of the merchant. With Cardfree, merchants can work with the tools they have in place and be assured they will control the experience and branding, Squire said.

While Cardfree just launched as a company last month, it’s able to get up to speed by leveraging some of the work of Katz’s other investment portfolio companies such as Snapfinger, which has already integrated with most POS systems.

I’m curious to see if Cardfree can make a splash. The team has some respectable pedigree and there’s some logic in appealing to merchants who want to build their own version of the Starbucks card experience instead of tying into another wallet system. But it’s a crowded market and Cardfree will have to prove it can actually deliver real return on investment. Big merchants like Starbucks and Dunkin can run their own payment and loyalty apps but it’s unclear if Cardfree can get enough businesses from other big companies that want a similar solution.

  1. Not sure what they have here… Seems like using pre-paid cards (digital or otherwise) adds more friction to the checkout process than simply using existing payment cards. Starbucks is a pretty unique entity in terms of loyalty/habit/frequency of visit… To suggest a C+V to the rest of the market…? Not so sure.

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    1. John S. Wilson Monday, December 10, 2012

      Agreed. And the Starbucks app has more bugs than days in the year. There are always issues. If folks want a payment platform that’s simple just align with Square.

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  2. Danny 'iPod' Chan Monday, December 10, 2012

    I think what would really sort of set this apart is the fact that you can pay using the system in a manner that is accepted throughout the industry. Google Wallet requires NFC systems in place, Square, I believe, requires the special readers. This new service seems to integrate everything into one function. If you get enough merchants and users on board, this reward system will be pretty awesome.

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    1. Square does not require a reader.

      Square has 2 apps.

      The register app is the app you can use to receive payments, either via a credit card reader or via directly entering a credit card number(the reader is FREE by the way, and it only took 2 weeks to get mine when they first came out).

      The second app is the one users download to pay for items. It uses GPS location and you basically “check-in” to the business and pay. After you have paid your credentials/items purchased- pop up on there POS system….whether it’s a PC or iPad. It’s pretty much does not require any special set up besides an account and the App.

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  3. Sqaure is the official payment processor of Starbucks and SB made a big investment recently in Square.

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