Verizon Backs a Loyalty Card Startup

This past weekend we learned from the WSJ that a loyalty card startup, called CardStar, has attracted the attention of Verizon. The carrier has invested $400,000 in the Boston-based company, which although it isn’t much, provides yet another indication that the major U.S. cell phone operators are becoming increasingly interested in the potential of the mobile payment technology to provide an additional, and potentially major, source of revenue.

Just a couple of weeks ago, another Verizon mobile payment venture made a much bigger splash when it was announced that the carrier was teaming up with rivals AT&T and T-Mobile, payment processor Discover and British bank Barclays to enable consumers to make payments at participating merchants using their cell phones.

The CardStar project is not nearly as ambitious as the other one, but it does offer a look into how retailers may be managing their loyalty programs in the near future. It is not immediately clear how Verizon will utilize the service to generate revenue, but it is a safe bet that they are seeing CardStar as part of a larger mobile payment picture.

CardStar has developed mobile apps for the iPhone, Android, and BlackBerry, which allow users to consolidate their loyalty and membership cards in one place. The idea is that you won’t have to carry all these small pieces of plastic on you anymore. Instead, the merchant can scan the card’s barcode from the screen of the user’s phone.

What makes CardStar attractive to retailers is that they can run promotions and loyalty programs through the startup’s back end. They can load offers, coupons and incentives directly into the application. Offers can be customized using a geotargeting feature.

CardStar claims to have signed up more than 2,000 merchants already, both large and small. “We have about 30 competitors out there, but all 30 put together don’t have the numbers [of users] that we have,” boasts CardStar’s CEO Andy Miller, as quoted by the WSJ.

Miller says that CardStar has 700,000 unique users and that number is sure to grow. On top of the convenience of storing all these loyalty cards in your phone, you won’t have to clip coupons anymore.

CardStar and its competitors offer shoppers convenience and retailers opportunities, but they are also helping us see the future of plastic cards, or the lack of it. Within a few short years, most of us will be using our cell phones to identify ourselves to retailers, communicate with them, find the best prices in our area or online, and pay for our purchases.

Image credit: CardStar.