Barely 3 Months Post-Launch, Loyalty App Punchcard Is Live In 15M Locations, Nears Profitability

The mobile apps from stealthy loyalty startup Punchcard have only been on the market since February, but the company is now reporting it's close to being cash-flow positive. Like a digital version of paper punchcards which reward repeat customers for their business, Punchcard's app lets customers snap photos of their receipts in exchange for cash payouts or other rewards directly from the merchant.

While not a new concept in and of itself, what's interesting about Punchcard is how it's been acquiring its business: it just switched on loyalty programs for millions of locations across the U.S., even if they didn't ask for it.

"We're looking at this as seeding the market, essentially," explains Punchcard CEO and serial entrepreneur Andy Steuer of why the company has seemingly put the cart before the horse. In other words, usage and rewards first, paying customers (i.e., businesses signing up) second.

"If you look at other location-based apps, they've turned on the ability to check in anywhere," says Steuer, "and we've turned on the ability to check-out anywhere."

Consumers use the app, which now works at 15 million (!) locations in the U.S., to verify their purchases by snapping a photo of their receipt. As they collect punches on their virtual cards, they can earn their way to cash, freebies and other rewards. Generally (unless a merchant has specified otherwise), the rewards arrive after the 10th purchase, and, if cash-based, are the equivalent of the average order value up to $30.

But how many of these businesses are actually paying for the system? Steuer declined to give exact numbers, only saying that Punchcard is "generating revenue from the sales of several thousand locations." Nor is he sharing the download numbers or active users numbers associated with the mobile applications.

He did note, however, that the company has paying customers, mostly in southern California where Punchcard got started, including a newly added Subway franchise. He also says that Punchcard is seeing a "huge conversion rate" from app download to usage and repeat usage, with transactions doubling every week. (But again, no exact numbers were provided.)

However, Punchcard has just partnered with KDA Group, one of the largest local marketing agencies, which will begin selling Punchcard to their network, which includes major retailers and chains, operating at around some 300,000 locations nationwide.

The company currently offers the service in two tiers (one for $29/month, another for $99/month), which provides businesses with access to an analytics view into who their customers are, and an automated re-marketing program that pushes offers back to customers to incent them to buy again. The solution works best for retailers, restaurants, grocery stores, coffee shops, and other local businesses that want to increase the frequency of their customers' purchases.

Punchcard isn't the only startup trying to digitize the loyalty space. Facebook just acquired loyalty play Tagtile, for example, Google acquired Punchd, while others like Perka and Perkville are also working on similar programs, to name just a few.

But Steuer says that Punchcard has some advantages over other efforts, as it doesn't use QR codes, in-store hardware, nor does it require connecting a credit card to your account to use. Having to snap photos of receipts, though, does involve some friction, he admits, but he says the company is working on other solutions that would allow customers to earn rewards in other ways. (More on that later).

Punchcard was founded in Q3 2011, but the mobile apps didn't officially launch until February 8, 2012. You can try Punchcard on iPhone or Android by downloading it from here.