As small Portland businesses struggled through a difficult holiday season amid the coronavirus pandemic, some began discussing the possibility of creating a communal gift card that could be spent at independent shops across the city.
Bricks Need Mortar, a coalition of local businesses, explored the idea but founder Sarah Shaoul didn’t think anything like that existed.
At the same time, Kiyo Kubo, a Portland app developer, was going door-to-door to businesses across the city, trying to convince them to sign on to his new startup venture, Kuto, an alternative payment app designed to save businesses money on credit card fees.
It was while Kubo was pitching the app to businesses that he connected with Shaoul and combined their ideas. Together, the two are planning to roll out a Kuto gift card at the beginning of June that consumers will be able to use at any Portland business that accepts payments through the app.
Roughly 100 breweries, restaurants, bars and retailers have already signed on and Shaoul is pitching the gift card idea to another 800 businesses in the PDXSOS network, a Bricks Need Mortar program launched during the pandemic to support struggling businesses.
“A lot of people reached out to me during the holidays and asked what they could do to support local businesses,” Shaoul said. “We’re really excited about this option.”
Shaoul is hopeful that the gift card will interest locals who might otherwise purchase gift cards to Amazon, Starbucks or other out-of-state, national chains, helping to redirect spending toward local Portland companies. She hopes the gift card will be a desirable option for companies to purchase as rewards for clients and employees, too.
Kubo, a 42-year-old app developer, has been working on launching startups since arriving in Portland fresh out of Cornell University in 2001.
Another one of his ventures, Meridian, a mobile software company whose apps guided smartphone users inside large venues like Powell’s Books, Providence Park and the Portland International Airport, sold for $26 million to Aruba Networks in 2013 and brought 250 jobs to Portland.
Early in 2020, Kubo and his business partner, Nick Farina, were working to launch a new business expense credit card, but kept hearing from local business owners that what they really wanted was a payment service that would cut down on the fees they paid for accepting credit cards. Once the pandemic hit, it became clear to Kubo and Farina that it wasn’t the right time for their business credit card.
Instead, they shifted gears and spent the heart of the pandemic developing Kuto, which now employs 10 people and is growing as more businesses sign up.
Kuto offers customers a contactless way to pay at participating businesses by prompting them to link their bank accounts to the app, similar to how people pay each other through Venmo. New users get a $6 credit for signing up that can be used at any business that accepts Kuto.
Kubo has ambitious goals, ultimately hoping to get business owners across the country to start using the app to accept payments. But he is focused for now on trying to build up interest in Portland.
“My hope is by the end of summer, half of all consumers in Portland have used Kuto,” Kubo said.
Several business owners said they end up paying about 1.5% per transaction for bank fees when customers pay with Kuto, while it can cost them upwards of 3% per transaction to accept credit cards through services like Square. Those big companies charge both a flat fee per transaction and take a percentage of the total payment.
Elizabeth Nathan, founder of frozen yogurt shop Eb & Bean, started accepting Kuto at her three Portland shops earlier this month. She said credit cards fees can be particularly costly for a business like hers where the majority of purchases are under $20, because she gets charged a flat fee per transaction. If more customers start using Kuto, she said it could make a notable difference for the business’ bottom line.
But while the chance to save money on credit card fees made it a no-brainer for her to give Kuto a try, Nathan said she became particularly intrigued when she heard about the gift card initiative.
She is hopeful that will be another way to encourage consumers in Portland to shop locally and support Portland businesses that have spent the last year trying to survive the pandemic.
“I definitely am very committed to anything I can do to boost our local community and be part of the solution there,” Nathan said.