The mobile loyalty card business is heating up. Last year I spotted Punchd at Thor Espresso and in the months between now and then a number of new competitors have entered the fray including Toronto-based start-up Club Ovahi. You might have seen their signs at places like Crepe it Up, Basha and R Squared. They aim to replace the traditional stamp-based loyalty card, all the while offering local businesses new ways to collect customer data and build loyalty.

Their iPhone app surfaced in the iTunes app store at the end of March and since that time they've had about 100 downloads and tweaked their offering based on initial pilot projects and customer feedback. I recently caught up with Ahmed El-Kadars (the co-founder of Club Ovahi along with Mohammed Ghalayini) who filled me in on their roadmap to success.

Why would a business want to replace their existing paper-based loyalty card system which currently doesn't cost them anything?

The value can be realized in several ways. Obviously there will be some savings in paper/stamp costs along with better accuracy. The customer experience is also enhanced since paper cards are often lost or forgotten, not to mention less paper is better for the environment.

However, the biggest value comes from the data. Club Ovahi allows the business to begin building a database of loyal customer info. This is a powerful marketing tool which can help a business strengthen its brand and increase sales. Additionally, learning more about customer demographics and habits can open up opportunities to fine-tune services and operations to increase satisfaction.

What is your revenue model?

Our pricing is currently evolving towards a monthly subscription fee based on the features that the merchant is using. We are keeping in mind that not all businesses require the same levels of mobile commerce capabilities.

Describe the feedback you received from your pilot at Jimmy's Coffee. In what ways do you think it's possible to address their concerns?

Jimmy's was a great pilot for us. We learned a ton. Their main concern was that customers using the app would slow down their very busy morning queue. We're actively working on ways to speed up the process, including ways to receive digital loyalty stamps out of the queue.

Who are the other competitors in this space? How are you different?

The mobile loyalty market is fragmented in both Canada and the US. In the GTA we've seen Google's Punchd in a handful of places and some other social loyalty apps have been emerging. RewardLoop in Vancouver is doing some interesting things. What differentiates us is that we want our customers to build Club Ovahi with us. We are spending a tremendous amount of time with our customers and users to define our future road map. Finally, we pride ourselves on developing simple solutions that are easy to use and don't require extra hardware.

How big a business do you think this can be? How many customers do you hope to have in Toronto by the end of 2012?

We're targeting to have anywhere from 50 to 100 locations by the end of 2012. It's critical at this stage to sign up the right business partners with high levels of digital marketing understanding. In the near future, we anticipate aggressive growth since the retail industry is increasingly embracing mobile customer engagement concepts; in fact, some projections estimate the size of mobile commerce in North America to be more than $30B by 2016.