First Data, the payments processing giant, wants to be more than just a black box on the counter. The company, which is owned by private equity firm KKR, spent the past two years buying up a handful of small business technology companies, including a point-of-sale system in Clover and a gift card product in Gyft, and this year made a strategic investment in the scheduling platform Booker.
We caught up with Peter Karpas, global head of SMB product, to talk about moving beyond the payment business, the company’s acquisition strategy, and where the world’s largest payment process fits into the future of small business.
Among startups, there’s this logic that eventually the interchange rate will go to zero, and that payments will make their money by selling ancillary services. Do you think that payment processing alone will be a profitable business moving forward?
I don’t think anyone knows the answer. I think the focus is on bringing value to small and medium-sized businesses. How can we help them? And the thing about saying payment processing goes to zero means all of a sudden “no bad guys exist in the world” — and I don’t see that. That doesn’t strike me as being a viable future.
I think credit cards and the card companies provide tremendous value in the exchange of goods and services and they make it both frictionless and less risky. I believe that we will be bringing more services to businesses but I don’t think the cause of that is that all of a sudden entire companies go out of business. I don’t think that is the driver. I think payments is a massive industry that more and more people are looking to get into, which would indicate the opposite.
Let’s talk a little about Apple Pay and what it means for small businesses. First Data made a big effort to support the technology, but some reports say it isn’t taking off with small businesses. What do you see and why?
Small businesses just want to get paid, and so they will support Apple Pay if they think it helps them get paid more — and it will. To accept Apple Pay, they would have to exchange out existing hardware, terminals. I’m not hearing any reluctance to having to upgrade their terminals, and many terminals are just now coming to market. For example we will soon be releasing Clover Mobile and Clover Mini and that hardware will fully support the acceptance of Apple Pay and any other ways to be paid, including Google Wallet, credit cards, et cetera.
It’s not about reluctance; it’s about having the hardware that can accept Apple Pay. In the end what they really want is to get paid, and to do it in a way that’s customer- and consumer-friendly.
What role do you see First Data playing in marketing services? Would this be something that the company would build itself?
We want to enable businesses to get the information they need to make better decisions. I think our plan is to enable others through particularly Clover and the Clover app market and platform. First and foremost we are creating a point-of-sale platform that will enable other businesses to get the kinds of information they need to be able to help the small business even more. One example of those is marketing services companies. The more data that they can get from a small business, the better their marketing can be and the better their marketing services can be.
If you think about marketing services being in two groups: One is helping them acquire customers, we are going to partner and enable and try to get everybody to build onto the Clover App market. When we’re talking about existing customers that same answer applies, plus on top of that, we have Perka, which we think of as being the world’s best loyalty product for small and medium-sized businesses.
The company has made a series of acquisitions ranging from a POS system in Clover to a loyalty card play in Perka. Has the acquisition period closed? Or are you still looking for new technology/products to buy?
As a company we are constantly looking for ways to bring more, better products to our customers. We haven’t announced a strategy to “go buy 50 companies,” or announced a strategy to not to buy any. We are constantly looking for how to bring the right products to market that help small and medium businesses. Acquisition is one way to do that as is building, partnering and enabling others through the Clover App market, as an example.
What’s the biggest problem facing the small business technology industry today?
I think the biggest issue is the same issue they’ve been facing 5, 10, 15 and 20 years ago — a small business person did not go into business to use technology. They went into business to do the things they wanted to do and things they love to do. They get pummeled by all these different purveyors of solutions, some of which are actually good solutions and some of which are not. Therefore it’s hard for any technology company to penetrate the small business mindset and say we do have a superior solution you should be using. And I think from a technology industry perspective, they find it hard to get to small businesses this way.
One of the great strengths of First Data is we have such good distribution and such good relationships with our merchants we are able to effectively give them real solutions. So if I create a great product will actually get into the hands of other people who will tell other people — and actually starting that is really hard.
Small businesses want to use technology that will help them serve their customers better, create a better experience, be more efficient and help them make more money and figuring out exactly which technology will help them do that has always been difficult. Which is why companies like First Data can be so useful to a small and medium-sized business. They can trust us to deliver quality products that will actually help them. When you look at Clover, Perka, Gyft, Insightics, we offer real products that can help real people and solve real needs.
Liz Taurasi is a contributor to Street Fight.