Watch your back, Groupon. A young entrepreneur on the rise is looking to woo local businesses with a new mobile app designed to boost their business, entice repeat customers, and save them swipe fees.

It’s called LevelUp and the 23-year-old entrepreneur behind it, founder and “chief ninja” of both SCVNGR and LevelUp, is Seth Priebatsch. He is launching the app—already accepted at 1,200 merchant locations in four cities (Boston, Philadelphia, San Francisco, and New York)—nationally today.

The free app works with any smartphone. Users link their LevelUp account to any credit or debit card and find LevelUp merchants in their area. When they go to pay, they use a security code to access their already stored credit-card information and the app generates a unique QR code that the merchant can scan at the register with their own smartphone or mobile device. Merchants give LevelUp users rewards as first-time visitors and extra credits for return visits.

For merchants who want some type of device on their countertops, LevelUp is starting today also offering a new custom hardware line through a partnership with T-Mobile. Each LevelUp Dock costs $25 a month or $250 a year and comes with a customized Android device running only LevelUp and connected to the T-Mobile network through the company’s nationwide partnership agreement.

Priebatsch says the key value proposition that the app offers to merchants is repeat business, something he has long argued that local businesses aren’t getting from daily deal companies such as Groupon, which has been criticized by small businesses.

“The daily deal model is broken,” he said. “With this, we’ve really, really improved the [customer] acquisition and retention problem.”

LevelUp charges a 2 percent transaction fee, which saves the retailer money on credit-card swipe fees, Priebatsch adds.

With his boyish face, jeans, orange T-shirt and matching orange sneakers, and sunglasses propped on top of his head (the orange matches the company logo and seems to be his uniform), you might mistake Priebatsch for a college student. He actually dropped out of Princeton to start SCVNGR in 2008 in Cambridge, Massachusetts. The company has brought in $19.8 million in funding, prompting at least one analyst to place it at a valuation of more than $100 million.

The prospects for LevelUp are good if the SCVNGR mobile application is any indication. It’s basically a reality-based mobile game that has its users going places, completing challenges, and earning points and unlocking rewards.

Some of its key business users have been jewelry retailers, who use the service for “Diamond Dashes,” essentially scavenger hunts in which hundreds of couples who plan to get engaged take to the streets and make their way to various locations based upon clues that are sent to them via text message. The couple who arrive at the final destination first win a diamond engagement ring.

In addition to jewelers, it is working with other industries, including the automotive industry.

“SCVNGR has been killing it a bunch on the big brand side,” said Priebatsch, who was heading this week to an event with Chevrolet. Other SCVNGR clients have included American Eagle and Coca-Cola.

But this is not to say that Priebatsch is averse to visiting local merchants and pitching his product. To get its first jewelry clients, Priebatsch and another executive just walked into the first stores they came to in Philadelphia’s jewelry district and quickly scored a deal. Word spread in the industry, and SCVNGR will run 120 of these diamond-dash events this year.