First Data's startup strategy starts to bear fruit
First Data's quest to be viewed as a diverse digital company means it can't just offer a product; it has to offer a platform that other companies can use.
With the mobile point of sale provider ShopKeep, it's taking a big step in that direction. ShopKeep will integrate with First Data's Clover Platform as part of First Data's Integrated Solutions Group, deepening First Data's role in the app economy.
"If you ask a consumer how they manage their life, they pull out a smartphone. That's where they keep track of stuff. They keep track of their finances, their tickets, their photos, their schedule," said Dan Charron, executive vice president of Global Business solutions for First Data in a Thursday interview. "That's the role we want to play for [small to medium] sized businesses."
A big part of the deal is Clover, First Data's line of digital and tablet-based point of sale systems. ShopKeep will incorporate the Clover Go software developer kit and the Clover hardware portfolio. Clover accepts EMV, NFC and mag stripe transactions.
In addition, First Data will make ShopKeep's point of sale software available through First Data's distribution network, including banks, retailers and ISOs. ShopKeep will incorporate First Data's payment processing and security.
"It's a big change in mentality," said Richard Crone, a payments consultant. "First Data was always based around hardware. Clover allows them to work in the app economy and it reduces their cost. The ShopKeep partnership is a 'coopetition.' One day they are competing and the next day they are collaborators."
ShopKeep has its roots as a cloud-based point of sale system created by the staff of a wine shop in Brooklyn. The concept matured after the 2010 launch of the Apple iPad, and in 2011 ShopKeep signed its first customer.
As part of First Data's outreach to developers through its Integrated Solutions Group, Clover's platform is being opened to the same types of merchants that ShopKeep serves. These merchants need apps to handle payments, PCI compliance, gift cards, electronic checks and other functions.
"You can run the business," Charron said. "It's not just payments. It's a small-business platform ... When you look at a small business, they need inventory, HR and other things like that. Shopkeep has all of that."
On its end of the deal, Shopkeep will gain access to a broader range of merchants and more recognition.
"This will bring our iPad point of sale system to all the merchants that First Data touches," said Etie Hertz, ShopKeep's chief revenue officer, adding terms such as fee structures from the new collaboration have yet to be determined. "In theory our addressable market really doesn't change, but there are merchants out there that may not have heard of us."
Beyond the immediate boost to ShopKeep's scale, the collaboration will improve transaction data collection and analytics, since the integration will provide a deeper view of a merchant's range of business activities and payments.
Other digital payment companies that serve the small to medium sized business segment, such as Square and PayPal, have used that type of transaction data to provide credit products, according to Crone. The trove of data allows Square and PayPal to lend to businesses with quick credit vetting, and the payments volume allows efficient repayment of loans.
"Once you have the transaction feed, you can add these other services, you can lend against a forward view of business based on past transaction receipts," Crone said. "And you can add a number of products and services to the merchant category. These businesses are busy, they don't have the time to go into a bank and go through the mountains of paperwork to get a business line of credit."