Rewarding civic pride and boosting the local economy? Akron, Ohio is trying out a startup for that

Akron, Ohio, the hometown of LeBron James and the seat of the US tire industry; the one hundred and twenty seventh largest city in the US; and the home of America’s first toy company is now the latest site of a global experiment in whether cities can use behavioral economics to help foster good citizenship.

Thanks to the work of the city’s deputy mayor for integrated development, James Hardy, Akron is the first city to roll out services from an Israeli-based company called Colu. A startup backed by just over $20 million in financing from American and Israeli investors, the company has developed an app-based rewards service that cities can roll out to provide perks to users.

In Akron’s case, the initiative rewards points for shopping at local businesses that can be redeemed for discounts at those stores. The initial effort, which includes a platform for businesses to market directly to the app’s users, focuses on businesses owned by women and minorities (a response to the movement for racial justice that has sprung up in the wake of the murder of George Floyd in Minneapolis).

Akron is the first city of what Colu founder Amos Meiri expects to be a nationwide rollout throughout the US. The company already has managed to ink another agreement with the city of Chula Vista, Calif.

Colu, which has raised its capital from investors associated with blockchain technologies like Barry Silbert’s Digital Currency Group; the Boston-based venture capital firm, Spark Capital; New York’s Box Group and the Israeli corporate conglomerate, IDB Group, has deep ties to the cryptocurrency world of alternative financial instruments through Meiri.

One of the original architects of the Ethereum protocol, Meiri’s work with Colu is in some ways an extension of that effort to create new kinds of economies powered by alternative financial mechanisms.

Meiri said cities typically pay for Colu out of their marketing budgets as a new way to communicate and attempt to influence civic behavior.

For Akron’s government officials, the company’s services are a way to boost locally owned businesses that have been hit hard by the state’s attempts to contain the COVID-19 outbreak.

“Our locally owned small businesses are facing enormous challenges and we need out-of-the-box ideas that safely connect them to consumers and turn local spending into a source of pride for residents,” said Akron Mayor Dan Horrigan, in a statement. “Our partnership with Colu will enable the city to reward customers for shopping local, improving revenues for our small businesses while helping folks stretch their dollars.”

Earlier work with the municipal government in Tel Aviv promoted sustainable business practice and encouraged businesses to do more to manage their waste and carbon footprint by introducing a “green label”. Businesses that followed the city’s guidelines were given the label and shoppers were encouraged to frequent those merchants.

Colu envisions itself as more than just a marketing and rewards platform for businesses. The company hopes it can draw users into a kind of social networking platform for civic engagement where users can share their own stories about city-life and their interactions with local business owners and the community.

In some ways, it’s a kinder, gentler version of China’s social credit scoring system, which is also designed to influence civic behavior. In this formulation, there’s a rewards system, but no mechanisms to punish citizens for bad behavior.

“Akron has a long history of innovation within our economy — this initiative draws on that legacy,” said Deputy Mayor Hardy, in a statement. “By putting the future of Akron’s locally owned small businesses in the palm of our citizens’ hands, we hope to make it easy for consumers to keep their money local and continue to strengthen our incredible community.”