Fattmerchant plans API to break the silos of all-in-one acquiring

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The money flowing into alternative merchant acquiring is feeding an arms race, with each new deal adding pressure to become an automated one-stop shop for small businesses.

In just the past couple of days, Square joined a pact with eBay to offer merchant credit. And GrubHub entered a deal to buy LevelUp to streamline mobile payments and marketing for the restaurant industry.

The Atlanta-based Fulcrum Equity Partners, which has a portfolio dominated by health care and software as a service companies, is getting more aggressive in fintech with an $10.5 million investment in Fattmerchant, an Orlando-based acquiring company. This follows an earlier investment in the fall. Fulcrum has also increased its investment in PhishLabs, a Charleston, S.C.-based security company that is pursuing more bank clients concerned about data breaches and other cyber threats.

Fattmerchant will use the new funding to develop and launch a card-present/card-not-present combination that exists in a single application programming interface.

This API, which Fattmerchant expects to launch in the fall, is designed to place myriad payments and merchant services under a single subscription, merchant account and dashboard.

"Companies call themselves omnichannel but still are offering single solutions for single purposes. We think a lot of companies are focused on one-off solutions," said Suneera Madhani, founder and CEO of Fattmerchant and one of PaymentsSource's Most Influential Women in Payments. "What we want to do is give companies a single place to do business."

This addresses a trend toward unifying user experiences for shopping, marketing and payments in different channels through a software-based approach over point of sale hardware—particularly among small to mid-sized businesses.

"These merchants are looking for a partner that can help them traverse all of the points in the processing world," said Philip Lewis, a principal at Fulcrum Equity Partners, adding the model must address the needs of remote service — a case in which merchants set up outside their store, or move about within a store — mixing data-driven marketing to inventory and transaction processing. "The changes come down to how merchants work now. You can't just rely on a physical location. You need to be accepting payments in the way that people want to pay."

The newer, more nimble approach to merchant acquiring is captivating technology investors, enough to draw in new entrants. The particular appeal is data-driven proactive sales, or stringing together several shopping experiences in different channels over time for recommendations, rather than relying on the consumer's own memory.

"The consumer doesn't work that way now," said Lewis. "You don't just want to pay by a card, you want pay any number of ways. And if you're a merchant you want to be able to offer people what they want. If they were on a site looking for shrimp and come into your store to buy halibut, you want to be able to offer them shrimp too."

In Fattmerchant, Fulcrum is investing in a company that has expanded is processing volume from $5 million in 2014 to $100 million in 2015 to a $2 billion pace in 2018.

With its planned API, Fattmerchant is trying to thread a needle between e-commerce interfaces such as Stripe and processors such as Square.

The small business alternative processing market is competitive, but it's also doing a better job at attracting investors than the larger incumbent processors given the fintech's lower overhead and ability to adjust quickly to market shifts.

Fattmerchant's services can also benefit from its "Netflix"-style subscription model, which is priced on monthly fees rather than as a percentage of each transaction.This model has been abandoned on the past by companies such as Square and LevelUp, but Fattmerchant says it's useful for a services-based model rather than executing payments as a core business.

"We're not bridging a gap…this system is bidirectional, everything syncs back and forth," Madhani said. "if you are doing invoices with Quickbooks, that customer record is back on the Fattmerchant platform."

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