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The check-in game as popularized by location-based services Foursquare, Gowalla, Loopt and others, desperately needs something more tangible than just the mere exclamation of a user’s location. One way to bring more value – and thus more interest – to the check-in is tying it to a real-world deal, like getting a cheaper beverage at a coffee shop in return for frequent check-ins. Now, a company specializing in digitizing the loyalty cards people carry in their wallets, CardStar, is integrating its service with Foursquare check-ins in an effort to make checking in more relevant.

CardStar’s technology lets users create digital loyalty cards from the ones in their wallet. Customers can whip out their smartphones at a CVS Pharmacy, for instance, and have the merchant scan the image of a barcode on the phone’s screen, which is more convenient than carrying a multitude of plastic cards around with you. And, according to CardStar CEO Andy Miller, the technology is a platform for a number of types of “merchants,” from big retailers like CVS and Best Buy to airlines and libraries: practically for every plastic card besides credit cards.

Miller sees the loyalty card being essentially about location, meaning that they are to be used at the point-of-sale, when a person is physically in a store. “At the same time the LBS guys [location-based services] are thinking about leveraging loyalty programs for the check-in. They see loyalty as a function of location, and we see location as a function of loyalty,” Miller said of the convergence of loyalty programs and location-based services.

Using the CardStar app is also a way of validating the check-in. When users have their digital loyalty cards scanned, they can check in with Foursquare using the same app, making it convenient, and also validating the check-in by proving they were actually at a given location (responding to the criticism Foursquare has faced over the fact that users can check in anywhere from their couch, if they so wish).

For Foursquare and CardStar, the integration is about expanding their demographic. Foursquare has around 2 million users, and CardStar boasts about 600,000 active users. Miller said there isn’t much overlap between the services’ users (“Half of our users are soccer moms, who I don’t think use Foursquare a lot”), which makes this a means for reaching new users and developing both the check-in and the loyalty card further.

CardStar claims to be on a climbing trajectory in the loyalty card game (facing competition from PlacePop, Cardagin, Mobestream Media and CardBank.) The company is coming out with a partnership with one of the network carriers soon, which will also be investing in the company. CardStar raised a small seed round in the summer of 2009 and brought in $1 million in another round last March, led by Amplifier Ventures. The company brings in revenue from the merchants, who pay a monthly fee, as well as from a partnership with JPMorgan Chase.

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