The round, which brings the company’s total funding to $45 million, was led by Charles E. Ryan, current Chairman of UFG Asset Management and former Chief Country Officer and CEO of Deutsche Bank Group in Russia, and included existing investors Redpoint Ventures, Sutter Hill Ventures, Opus Capital Ventures and Pinnacle Ventures.

Founded in 2009, the company works with 100 different merchants (from 30 different categories) and four financial institutions, to give consumers free, no-strings-attached gifts in the form of credits to their credit and debit cards. With the “gifts,” consumers can purchase items of their choice from the merchants offering the gifts. In return, retailers get more store traffic and sales, without slashing prices.

“This is not a twist on couponing. It’s the first time that merchants are able [attract] consumers on demand without discounting,” said Gadi Maier, CEO, president and co-founder of FreeMonee. “They can bring [as many] people [as] they want, when they want them, where they want them.”

With the new funding, the company said it plans to continue pursuing its mission to “change the economics of advertising” by expanding to include more merchants and banks and building out the platform’s underlying technology. FreeMonee’s ‘gift underwriting engine’ analyzes transaction data from financial institutions to match hundreds of thousands of merchant gift options with the customers who are algorithmically determined to be the most likely to redeem them based on their purchase history. For example, the company previously told me that it has found correlations between golf, charitable donations and travel, so a consumer whose past transactions include airline tickets and donations to nonprofits might be interested in new golf clubs and offered a credit to Sports Authority.

When FreeMonee receives the purchase history from the banks, the transaction data is entirely stripped of personally identifiable information to protect consumer privacy. But given sensitivities around personal information and lingering distrust of the financial industry, financial institutions and partners may feel that they need to tread carefully. U.S. Bank and CapitalOne have publicized their partnerships with FreeMonee, but two other banking partners have not publicly disclosed their participation. Still, by linking their cards with merchant rewards, financial institutions may be able to give consumers another reason to bank with them.

FreeMonee said the incentives lift sales by 400 to 700 percent and that for every $1 spent on a FreeMonee campaign, brands’ return in sales is $6 to $8.

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The deal represents a turn for Shopkick, which has focused so far on lining up big national retailers like Target, Macy’s, Best Buy and American Eagle. The goal for Shopkick is now to recruit small and medium-sized businesses in locations starting in Austin and Dallas/Fort Worth; Chicago; Detroit; Los Angeles and the San Francisco Bay Area; New Orleans; New York City; Seattle; and Washington, D.C. Business owners will need to apply with Shopkick, which is looking to help places like coffee shops, yogurt shops, cafés and local fashion stores.

If you’re not familiar with Shopkick, it allows users to earn “kick” currency for visiting stores or doing specific things like scanning a product. Shopkick recognizes a user with a signal box installed at a location, sending out a notice received by iPhone and Android devices that have the Shopkick app installed. Users can eventually redeem real rewards with their accumulated kicks. The app has been downloaded 1.8 million times since it became available in August.

The service has been well-received by some retailers, because it allows them to drive actual foot traffic, and measure how their deals are faring with users who are confirmed to be in the store. Sports Authority, for example, was able to get 50-70 percent more walk-ins by increasing the amount of kicks it awarded to Shopkick users. By ensuring that a consumer is present, the app allows merchants to engage directly with their customers, and to reach out to them with offers and rewards based on loyalty.

This is part of a larger battle brewing between companies like Foursquare, Facebook, Google, Groupon and a bunch of other services, which are trying to tap into marketing budgets of local merchants. Shopkick’s move to broaden its outreach to smaller businesses makes sense, because the opportunity in the space isn’t just limited to companies with national footprints. But it also faces challenges. Convincing people to sign up for free signal boxes may work to attract an initial pool of 1,000 locations with relative ease.

But local businesses who don’t qualify have to pay for hardware, which costs something less than $100. And retailers who aren’t in the free program will need to pay Shopkick a small commission fee for each “kick” a customer earns and a percentage of any transactions people make after using an offer. Check-in based services like Foursquare don’t require the same investment, which could be a selling point for the competition

But it seems like Shopkick is connecting with its users; 40 percent of those who sign up are active monthly. That’s a solid percentage for a new service, and shows the model can work. Now, the company needs to be able to convince local merchants that it makes good financial sense to sign on. Making it free for a limited number business owners can help, but Shopkick still ultimately has to prove that its success with national retailers can translate and scale to local shops.

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