Boston has become the proving ground for a pair of services that use credit card purchases to track retail loyalty. Cambridge-based LevelUp enables users to link their credit cards to a secure virtual wallet application that also issues instant discounts for both first-time and repeat purchases. The company operates in Boston, Philadelphia, New York and San Francisco.

Meanwhile, based in Providence, R.I., Swipely announced plans to expand its testing area to include LevelUp's home turf. Swipely differs from LevelUp by linking discounts and loyalty rewards to customers' existing credit cards.

Swipely originally launched as a social network for credit card users, enabling frictionless sharing of purchase data. Critics of the original service cited privacy concerns, inspiring the company's founders to shift their focus toward turnkey marketing and retail analytics. According to a report in the Boston Business Journal, Swipely CEO Angus Davis predicts his company's service will succeed by encouraging customers to use their existing credit cards for everyday purchases.

Swipely and LevelUp participants embrace credit card transactions

Because both loyalty programs leverage customers' accounts, they could enable more small businesses to accept credit cards. Swipely users authorize the service to scan transaction histories for purchases at participating merchants. Retailers who join LevelUp install customized smartphones at their point of sale counters, capable of reading account codes from customers' mobile devices. Restaurants and service businesses that don't already accept credit cards can use LevelUp as an inexpensive alternative to traditional merchant accounts.

The services both compete for vendors' marketing dollars against daily deal websites like Groupon and Living Social. Instead of offering limited-time, impulse offers, Swipely and LevelUp provide users with online directories of participating merchants.

Swipely's service resembles the "Link, Like, Love" program offered by American Express. AmEx automatically credits cardmember statements with discounts from participating merchants, promoting new deals on the company's Facebook page. As retailers compete over small margins, consumer loyalty programs can help justify the cost of accepting credit cards.