Acquirers Differentiating through Early Stage Investments
The acquiring industry has long been familiar with M&A activity and has experienced continued consolidation over the years. Historically, most of the M&A activity involves acquirers purchasing other acquirers or ISOs. It has been less common for acquirers to make investments in early stage technology companies. However, we observed a number of large investments in technology start-ups from leading acquirers in 2013, particularly from First Data Corporation and Heartland Payment Systems. The investments hint at the future of the point-of-sale and acquirers’ commitment to differentiating their respective suites of products and services.
One of the notable themes is that acquirers are seeking to invest in market leading tablet-based POS solutions. First Data acquired Clover, a young technology company that developed a sleek, cloud-based, open architecture POS solution. Clover offers a full-service platform that enables merchants to accept payments, manage payroll, track inventory, and perform other tasks. Merchants can utilize apps to customize and manage day-to-day business needs. In a similar case, Heartland recently invested in Leaf, another tablet-based POS developer. Leaf similarly offers multiple apps that empower retailers to tailor their POS solution to their unique needs. Leaf is an integrated cloud-based platform that accepts payments, handles day-to-day business tasks, and provides managers with a dashboard to analyze performance. While the cost of First Data’s acquisition of Clover wasn’t disclosed, Heartland’s investment in Leaf was reportedly $20 million.1
On the software side of payment acceptance, First Data acquired Perka, a mobile loyalty solution. Perka is an application that integrates with existing POS platforms and enables merchants to interact with their best customers. Heartland recently invested in TabbedOut, a mobile commerce application that also works alongside a merchant’s existing POS. TabbedOut targets the restaurant and hospitality industry, and it enables consumers to pay their tabs via their smartphone. Merchants can integrate TabbedOut’s software to expedite customer checkout, improve table turnover, and distribute relevant offers. Heartland contributed to TabbedOut’s $7.75M Series B funding round.2 Moving forward, TabbedOut will leverage Heartland’s national sales network to support distribution.
The acquiring landscape is fairly concentrated, with the top 10 acquirers making up 80% of the acquiring market. To avoid making payment acceptance a commoditized product, acquirers are looking to advanced technology and value-added services to differentiate their merchant services offering.
1 Bostinno – Sept, 2013.
2 FinExtra – Oct, 2013.
For more information, please contact Patrick Carroll, Associate, specializing in Merchant Acquiring, email@example.com.
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