Cartera Commerce Eyes Local Merchants to Drive Card-Linked Loyalty Program Business

Lexington, MA-based Cartera Commerce got started in 2005 under the name Mall Networks, as a provider of online malls where credit card holders and airline frequent flyers could earn rewards for buying goods from a collection of brand name merchants.

That was before group buying and the financial crisis of 2008 happened. Both of which (yes, even the latter) are creating some serious opportunity for Cartera, says CEO Tom Beecher. The company was renamed last year after the Spanish word for wallet, to reflect its broadened ability to offer deals for local and national merchants both in stores and online. “As we working more and more with brick and mortar retailers in store, we felt we had outgrown the name,” he says.

The local merchants are now the fastest growing piece of Cartera’s business. The company has more than 60,000 merchant advertiser clients, with local markets accounting for a number in the single digit thousands, Beecher says. But there are 5.5 million U.S. local merchants that allow customers to pay with credit or debit card, so he hopes that Cartera’s local merchant clients can grow to hit the tens or even hundreds of thousands over time.

“With Groupon and Living Social local merchants are much savvier than they used to be,” says Beecher. “The ability to really drive thousands of local merchants into the network is not something we would have expected two to three years ago.”

How does Cartera’s service work? A bank, for example, might offer a 5 percent cash-back discount when customers shop using the bank’s card at particular stores that have signed on with Cartera. If customers buy goods at one of those stores using the particular card, Cartera tracks the spending and bills the merchant a commission. A portion of it goes to the consumer as the 5 percent cash-back, and the remainder is split between the bank and Cartera.

Merchants don’t have to decide specifically which bank or airline to market their offers through; they buy into Cartera’s network and Cartera does the matching, says Beecher. Unlike most group buying deals, Cartera’s card-linked technology helps merchants track how their offers are doing at attracting new customers, and how loyal those customers stay over time—without exposing the shopper’s identity, Beecher says. Merchants only pay Cartera once a customer has actually shopped there and gotten the deal.

So what was that about the financial crisis? See, Cartera also works with the banks to connect them with the merchant deals to offer to their cardholders. And since the financial crisis pushed some regulatory reform that has prevented credit and debit card providers from charging some of the fees that they used to, banks have been scrambling for new ways to make money, Beecher says.

Cartera works with more than 60 banks and loyalty programs, including the top five financial institutions and three of the top four airlines. Last week Cartera announced it was working with Barclays and IHG.

The startup has raised over $30 million in venture funding from backers like Dace Ventures, Flybridge Capital Partners, LBO Enterprises, and Venture Capital Fund of New England. It has about 165 employees that it hopes will hit 200 by the end of this year.

Beecher said Cartera’s roster of merchant clients and bank partners surpasses other competitors in the space. Earlier this year the company merged with Atlanta-based competitor Vesdia. With group buying and other consumer focused companies scrambling to better attract loyal customers, it will be interesting to see who catches the eye of local merchants

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