Kids' school lunch money has become a new payments-industry battleground.
A move among schools to replace costly paper-based meal-payment systems with various electronic methods is suddenly accelerating as acquisition-hungry Heartland Payments Systems Inc. muscles in, snapping up smaller companies to build market share rapidly.
A more established player, Horizon Software International Inc., is countering with its own moves to entrench its position, including expanding its offerings and beefing up mobile channels.
The opportunity to provide point-of-sale payments technology to districts with schools supporting kindergarten through 12th grade is gaining appeal as competitors recognize the relatively low use of electronic payments at schools and the potential for an ever-expanding new crop of customers, says Todd Ablowitz, president, Centennial, Colo.-based Double Diamond Group.
"I expect to see many additional entrants into untapped areas," Ablowitz says, noting mobile and cloud technology is helping to accelerate the trend by expanding usage to more devices.
Princeton, N.J.-based Heartland last year began an aggressive foray into the school meal-payments arena, acquiring in quick succession several smaller firms specializing in point-of-sale payments for K-12 schools.
The firm this week notched its fifth such acquisition in 18 months, LunchByte Systems Inc., bringing its reach to 29,000 U.S. schools. Heartland now claims about 30% of the K-12 school-meals payments market, Michael Lawler, president of Heartland's strategic markets group, said in an interview.
And Heartland is still in the hunt to devour more of the smaller school-meals payments firms and bring them into its new unit, Heartland School Solutions, Lawler says.
"We are keeping our eye out for other possible acquisitions to increase our overall penetration in this market," he says.
Atlanta-based Horizon provides school-meal payment services to about 600 U.S. school districts in 42 states with close to 2 million users, Tina Bennett, Horizon vice president of online payment systems, said in an interview. She declined to specify Horizon's approximate market share.
"We have some of the largest school-district players in the country, including major districts in Los Angeles," Bennett says.
Horizon is working to expand its mobile offerings. On July 10, it unveiled what it says is the first broadly available mobile app for funding accounts to pay for school meals and other services.
Consumers may download the firm's MyPaymentsPlus app for Apple Inc.'s iPhone for free, and an Android version is coming soon, Bennett says.
The new app mirrors Horizon's existing online account-funding options, similar to those Heartland offers.
Both companies' systems enable parents to load funds to an account used to pay for school meals, activities or other services through schools’ closed-loop systems. Students typically initiate payment at the point of sale by providing a PIN, their name, their photo or a fingerprint.
Parents can check account balances, review recent transactions and add funds using a credit or debit card or, in some cases, from a bank account. The systems typically include the option to receive an email notification when an account nears a preset low-balance threshold.
Though Heartland does not yet have a separate iPhone mobile app for its two core school meals payment platforms, its online payment services are optimized for mobile devices, Lawler says. And Heartland offers an iPhone app for Cafe Prepay, its service enabling parents to pay various monthly school fees, he says.
The vendors typically charge a fee each time a parent reloads a child's school account, but the fees and arrangements vary widely by school and district, both firms say.
Heartland charges parents a flat fee of about $2 to reload students' accounts, Lawler says. Horizon did not disclose fees it charges.
And as school districts struggle to meet administrative demands with shrinking budgets, more are opting to foot the bill when they outsource payment services to firms that offer more convenient options for parents, Bennett says.
"We're seeing a trend in which more districts are paying for our services because they are saving money on administrative costs, so they come out ahead," she says.
Both firms offer schools methods to collect payments for an expanding array of goods and services beyond meals, including yearbooks, sporting activities, parking and school-material rentals.
"Many districts want to move all these purchases to a third party because payments can be consolidated in one place instead of the school chasing down thousands of checks for different payments through multiple different departments," Bennett says.
Heartland is Horizon's biggest competitor in the school-meals niche, Bennett says.
But unlike Heartland, Horizon does not typically try to expand by acquiring other companies.
"You can get a foothold at schools by acquiring companies, but it's going to be difficult to get various different types of payment systems to work together on one platform," she notes. Horizon instead sells its services directly to schools.
Heartland, on the other hand, sees benefits in harvesting technology from various school-meals payment systems, Lawler says.
"We're moving all the companies we acquired onto Heartland's payment-processing platform, and we're gaining certain innovative assets that are helping to enrich our overall product," he says.
Heartland so far has developed My LunchMoney and MySchoolBucks. Both services enable parents to pay for meals and other services schools sell, Lawler says. The firm also offers menu- and nutrition-planning services for schools, and SeeMyPlate, a technology enabling parents to view photos online of that day's school meal.
Heartland has even bigger designs on the education market.
The processor already has substantial offerings in college campus card identification systems that include payments, and Lawler hopes one day to bring its K-12 payments services together with its higher-education campus offerings.
"K through 12 now is a separate market, but someday we would love to transition it into our campus solutions," Lawler says.