CardSpring’s Alternative to the Electronic Wallet

It is a given in some circles that the next era of promotions will be driven by electronic wallets that perform transactions, manage deals and coupons, and target and engage loyal consumers. Google, American Express, MasterCard, LivingSocial, Groupon, AT&T, Microsoft and Square are just some of the companies that are purported to be developing some type of electronic wallet.

The result, however, may be a fragmented market where no standard takes hold. A $5 Foursquare rebate from American Express is a nice offer, but leaves out MasterCard holders. Moreover, while the e-wallets concepts can work for online deals, where do they leave the offline deals that make up the bulk of transactions today?

Those are the questions raised by CardSpring, a venture-funded firm that seeks to build a common payment and loyalty platform. Cardspring was launched 18 months ago by several Silicon Valley platform vets, and has received $10 million from Access and Greylock, among others.

Today, CardSpring announced a white-label pact with First Data, the giant financial company that processes transactions for roughly half of U.S. merchants. The First Data “OfferWise” solution will link offers to major credit association brands, PIN and signature debit cards. Major reseller affiliations with SMB ad outlets such as Yellow Pages are in development.

The company’s basic idea is to make it easy for retailers to instantly add their own promotions and loyalty programs to any transaction via payment terminals or smartphone. Consumers need to self-activate individual apps on their cards via the Web (not always easy) or via swipes at an in-store terminal (easier).

CEO and founder Eckart Walther told BIA/Kelsey that the transactions companies are experts at selling batch driven and inflexible payment services. But they are limited. In the mid-1990s, he notes that the industry went though a number of failed first generation smart payment services, such as DigiCash and CyberCash. He suggests that the addition of data services — advertising — makes CardSpring’s smart payment services more scalable.

Walther’s goal is to add a “Payment Rail” to SMBs indirectly via small-business publishers, such as Yelp or a Yellow Pages company. Working with CardSpring, a company like Yelp can provide a plumber with a real-time ability to get cash back, provide an upsell or refer friends.