Pretty much everyone knows inflation eats away at purchasing power. A dollar today is “worth” several percentage points less in the grocery store aisles, at the electronics store and certainly at the pump.
We get less gas in the tank and less chicken on the plate for the same dollar tendered at checkout. Getting some extra dollars’ worth of value in the digital wallet, spendable across everyday activities, or even a splurge, would seem a tempting offer for most consumers.
David Metz, CEO at AdTech firm Prizeout, told PYMNTS’ Karen Webster that adding value — monetary value, that is, at key points of engagement — can turn cash disbursements and withdrawals into rewards that ultimately grow merchants’, banks’ and gig economy revenues and cement loyalty.
The company’s AdTech platform connects partner firms with consumers who are typically looking to “cash out” — giving them access to bonus offers through gift cards and other rewards. Those brand-related bonus incentives are typically worth as much as 11% more than a simple cash out.
Those gift cards can be redeemed at a number of retailers, spanning Apple to GameStop, and a host of local merchants. The gift cards are delivered by email.
Beyond that, the company has bonus offers and lets users earn Prizeout Rewards. In the latter program, users can earn points with every withdrawal. In terms of mechanics, the users earn one point for every dollar spent on its marketplace.
Disrupting Funds Out
“We’re disrupting the traditional ‘funds out’ process,” Metz told Webster.
That disruption, he said, has positive ripple effects up and down commerce ecosystems. As we’ve typically used them, all withdrawals are fee-based. Whenever someone withdraws funds from a digital wallet, for example, someone’s paying a fee — and that fee is paid by the consumer or their chosen place of business.
However, Metz said Prizeout has been able to turn that model upside down and have partners monetize those withdrawals, in part by eliminating those intermediaries.
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In terms of mechanics, the consumer logs into their online platforms and selects Prizeout as their payout provider at checkout. The company uses ad technology to show consumers the right brands at the right time.
Metz explained that behind the scenes, when a user clicks on Prizeout, the company’s partners pass on a series of metrics, including the consumer’s age, gender, location and account balance.
“The person the merchant is bidding for is exactly that person,” Metz said.
This sidesteps the great unknown that comes when someone walks into a CVS or Walgreens and the merchants have no visibility into who is buying or ultimately using those cards — thus also cutting down on gift card fraud.
Prizeout then extends 26 gift card options to the consumer as those same merchants engage in a real-time auction to bid for their targeted demographic. A slice of revenue share from that added purchasing power goes to the Prizeout merchant partners.
Prizeout has said that 98% of all merchants shown have received engagement on the platform. Consumers are quickly adopting the opportunity, earning Prizeout 60% quarter-over-quarter active user growth since 2020.
All told, Prizeout has presence across 11 verticals — up from only one vertical as recently as two years ago — spanning thousands of merchants and entities across gaming, government and crypto. The Prizeout partnership base has billions of dollars of transactional volume, with $1 billion in balances shown to brand offerings on the platform.
The company typically “sits next” to traditional payout options, such as ACH, PayPal or even physical checks — where payouts are dollar for dollar.
“If a consumer’s withdrawing a hundred dollars, we allow them to withdraw $111, but it’s earmarked for a specific brand, whether it’s Amazon or local gasoline or a restaurant,” he explained.
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He offered the hypothetical situation where a user might, through the DraftKings app, have $150 in winnings — but by tapping into the Prizeout platform, and the merchant base within Prizeout’s ecosystem, they can collect gift cards or other rewards worth as much as $163.
The model moves away from the traditional conduits, where DraftKings would link with PayPal, PayPal would link to the consumer’s checking account, and down the line, Starbucks would pay Facebook and Google in a bid to reach the consumer and incentivize them to spend money with those merchants.
Metz said in this way, the consumer gets the benefit in seeing the payout value lifted; the commerce ecosystem shares in the economics of the platform model.
As for the adoption, as recently as the firm’s Series A in May 2020, the company had sought to capture up to 2% of the withdrawal flow across its base — and that tally now tops 12%. That penetration rate has gained steam as conversion rates are around 30% on first-time Prizeout interactions, which have leapt to 70% upon subsequent interactions.
Metz observed to Webster that the purchasing behavior differs dramatically depending on the vertical.
“If you’re coming to Prizeout from gaming or lottery or even crypto,” he told Webster, the rewards are treated as “found money” that can be used for a treat or for going out for dinner.
But engagements come across payroll or gig economy stakeholders, and this is money they use in order to live every day and use for gasoline and groceries. The typical Prizeout transaction value is about $108; for larger payouts that top $1,000 or more, consumers tend to take at least some of the payouts in cash.
Looking ahead, Prizeout came to market with its first bank partner, and will look to expand its presence with traditional financial institutions (FIs), including banks and credit unions. In that instance, consumers would allocate cash from their accounts (the Prizeout button “lives” on their account page) housed within the banks to buy merchants’ products and gift cards — getting roughly 8% more gasoline or other retail choices in return.
Prizeout, he said, is able to give the FI’s consumer base more purchasing power, and the bank makes more money (through revenue share) than it would through interchange, debit and credit card spend, increasing the value of the banking app itself in turn.
The company recently partnered with Square, which gives Prizeout access to millions of local businesses. It will be up to those local merchants to create campaigns — and once they do so, Metz said, Prizeout will find the relevant consumers in the merchant’s local market.
“All we need to do is make sure that when the customer shows up with their digital gift card that it is accepted at the point of sale,” he said, whether that is online or in-store.
New Funding Round
Prizeout announced Wednesday (March 31) that it closed a $25 million Series B fundraising round. Investors included Mark Cuban, Precept Capital, Continental Investment Partners, Astralis Capital, Riverpark Ventures and Anchor Capital.
When asked by Webster what the company would do with the funds, Metz said the company would boost its business-to-business-to-consumer (B2B2C) offering and beef up its data analytics. Regional expansion plans will take Prizeout into the Middle East, beyond its current markets in Canada, the United States, the U.K. and Ireland.
“We’ve decided to go to the source of the funds before it hits your checking account,” Metz told Webster. “Wherever you have a stored balance and the ability to direct those funds, we want to be an option.”
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