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- US inflation is at a 40-year high, making essentials like food and fuel increasingly expensive.
- Upside, a cash-back app recently valued at $1.4 billion, aims to help consumers save money.
- Users save an average of $35 a month, and its CEO, who worked at Google, said some save hundreds.
Inflation in the US is accelerating to 40-year highs driven by Russia's invasion of Ukraine, disrupted supply chains and pent-up post-pandemic demand. In an overheated economy flirting with stagflation, consumers are trying to save money on everyday essentials.
One way to do so is by making use of cash-back options. The startup Upside thinks it has found a way to beat competitors and save some consumers hundreds of dollars a month.
The app has just raised $165 million at a $1.4 billion valuation and operates in all 50 states.
Its partners with 30,000 gas stations, 19,000 restaurants and 500 grocery stores as well as Uber and Dunkin' Donuts and its CEO hopes to expand to major retailers like Walmart.
'It's not unheard of for people to save hundreds of dollars a month'
Upside
Alex Kinnier, who co-founded Upside and is also CEO, is a former Google engineer who worked under chief economist Hal Varian. He told Insider that the app puts "value" back into the community.
Kinnier is focused on achieving "economic efficiency" reminiscent of Economics 101 classes on supply and demand and instilled under Varian. He said the company does this by giving buyers money for goods or services they would have bought anyway, and bringing more custom to the merchants they buy from.
He estimates $550 million has been generated through this type of value creation, with 60% being "incremental profit" for merchants and the remainder being additional spending power for consumers.
Upside takes a slice of the profits generated by merchants using the app, which is free for consumers.
The app offers averages of 10c a gallon cash-back on fuel, 13% on groceries and up to 17% on restaurant bills.
Kinnier said the average user in major cities uses the app nine times a month. "It's not unheard of for people to save hundreds of dollars a month using our product," he said, but added that the average was $35 a month.
Upside differed from its rivals by being able to prove to businesses that it had brought in customers by quantifying the transaction amount attributable to the app, Kinnier said.
Companies "understand there's an opportunity for them to make more profit in a quick way with very little work", he said, calling each transaction "attributable, incremental and profitable."
"The system is constantly working to create a more efficient economic end-state," Kinnier said, quoting Varian.
With an expectation that retailers such as Walmart and Target will pass on some of their rising costs to consumers, Kinnier said other avenues needed to be explored to help shoppers.
Can cash-back help fight stagflation?
While some say cash-back saves money for consumers, some studies have argued it only encourages more spending than they could normally afford.
Kinnier said Upside falls into the former category because of the focus on essentials like gas and groceries. The app had 40% growth in users between February and March as people tried to reduce their outgoings, he said.
"The categories that we're in, you have to buy. These aren't wants, these are needs," he said. "And consumers are really desperate for control, because inflation is out of their control. We can give them some bit of that."
Kinnier said he had seen consumers cutting back on eating out and spending more on groceries and gas.
"There are so many merchants that could use our help and so many consumers that could use our help," he said. "We feel a responsibility to get the product to as many people as we can."
from Business Insider https://ift.tt/Iy5RMbl
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