Start-up of the Week / It Will Shrink Your Wallet

Rewardy, a customer loyalty punchcard for your smart phone, cuts out the clutter in your wallet while keeping you on track for your freebie reward.

Peek inside your wallet or pocketbook. Is it bulging?

The average Israel has 2.4 plastic credit cards. But stuffed alongside them, you're likely to find all of those customer loyalty punch cards, dog-eared and folded away, that promise your 10th coffee, croissant or falafel will be on the house.

Add your bus pass, the requisite family photos and the cards of all those stores that ask for membership, and you've got an overflowing wallet before you add even a coin or bill.

If you're sick of your bulging wallet stretching out your back pocket or weighing down your purse, the Israeli start-up Rewardy can help.

Rewardy is a smartphone app that will zap those paper loyalty cards from your wallet and replace them with virtual punch cards. No mess, no fuss, and when it comes to bulk, a lot less.

The company was founded in 2010 by three partners, all of them named Eyal. Eyal Peleg is the vice president of R&D and handles the technology at the company. Eyal Magen is the lead investor. Eyal Barzilay is the company's CEO and director of business development.

All three Eyals, says Barzilay, are in their 40s and have senior positions at high-tech companies under their belts. "We built the company by bootstrapping, using our own money," says Barlizay.

Their concept was simple. Take something recognizable – the loyalty punch card – and modernize it.

"In the world of cards, it's clear that the holy grail is cell-phone based payments, but that's still a ways off, and we have started with something simple, the punch card," he says. "The concept of the punch card is simple and accessible. It comes from a recognizable product, and doesn't require educating the market, neither the customers nor the business owners."

The first business to jump on Rewardy's bandwagon was Café Hyrcanus in northern Tel Aviv. Today, Rewardy's client list includes the burger chain Agadir and the ice cream chain Vaniglia. Like holes punched on a card, its range of clients continues to stack up.

"I found out just now that a laundromat has registered for the service and there is a whole slew of hair salons are also joining," says Barzilay. "At first it was hard work. I would get up in the morning, get on my bicycle and go from business to business. Now, it's already selling itself." Aboulafia, a popular chain of bakeries across Tel Aviv, saw their neighbor Vaniglia using the service, and they, too, have now asked to join.

The technology behind Rewardy's product is simple. A business owner registers for the service, designs a virtual card and receives a secret PIN with which he can subscribe his customers to the app. There is no need to configure anything at the at the shop counter.

Nearly 500 paying business subscribers have signed up for Rewardy so far, approximately 90 percent of them in Israel and roughly 10 percent in the United States. Depending on the volume of business' loyalty card-using customers, monthly service fees for Rewardy business subscribers range between NIS 50 ($10 in the U.S.) and NIS 100 ($25 in the U.S.) per month. The service has app versions for Android, iPhone and Blackberry phones.

According to Rewardy, 30,000 users have so far downloaded and used the virtual punch cards to work their way towards a freebie.

To gain both financing and guidance, Rewardy has teamed up with a company that knows the punch-card niche.

"In September we completed our first round of fundraising for $400,000 from the company, the number three company in Russia for coupons," says Barzilay. "From our perspective it's an optimal partnership, to partner with someone who has a team on the ground. A punch card is a great complementary product for coupons because coupons are good at bringing in new customers and punch cards are good at creating customer loyalty."

Rewardy hopes to soon expand from their three-employee base.

"We aren't fighting right now to win over individual businesses because we have a solid foundation," says Barzilay. "The goal is to expand into foreign markets. We are talking with potential partners in Poland, South Africa, Germany and Italy. We are also in the process of raising more capital from private investors."

They also hope to soon evolve their product into one that can enable direct payments from customers to businesses. Like the free drink at the end of a punch card, however, it will take time before they can reach that goal.