First Data, a Payment Processing Giant, Looks Beyond the Swipe

d4a565f5cb80235029cf65a23b6955fa_400x400The largest payment processing company in the U.S. is officially in the marketing business. Last week, First Data Ventures, the payment processing giant’s venture wing, announced a partnership and investment with social marketing platform LocalVox — the latest in a string of investments meant to help the payment processing giant enter new markets.

FirstData declined to disclose financial details of the investment.

The alliance comes as pressure continues to mount on the payment processing industry to expand its revenue streams beyond the interchange fees that drove the model for decades. The entrance of Amazon — a company notorious for ruthlessly pushing down margins in the industries it enters — into the card reader space last week suggests that the need for alternative revenue streams may come sooner than previously thought, adding pressure on companies such as First Data to accelerate new investments.

Senior Vice President of First Data Ventures Peter Donat said the partnership will allow First Data to improve its analytics platform, which uses sales information to create actionable solutions for small to midsized businesses. New York-based LocalVox, which develops marketing automation software, will allow small businesses to target and measure marketing campaigns based on consumer’s payment data collected through the payment processing terminals.

“First Data’s analytics platform, plus LocalVox’s marketing automation expertise, means SMBs can see what’s happening and address it in near real time,” said Donat.

Because of First Data’s scope of influence, this deal could affect a lot more than just the companies involved and their customers. First Data is aggressively pursuing companies they think can improve their product and profitability, with marketing firms high on their list.

“We need to continue to transform ourselves to meet our customers’ needs — that means [ensuring] that we’re staying on top of new technologies” Donat said. “That’s one of the reasons we put the Venture Group together. We’re trying to find a combination of that disruptive technology that really does help create a solution that meets those customers’ needs, will help our customers’ grow their business and help First Data Grow our business.”

Marketing firms that want to catch First Data’s eye should focus on developing apps for Clover, the company’s point-of-sale platform. Donat said First Data Ventures is paying very close attention to the companies that do, and they will not be shy about partnering up with the ones that impress them.

“First Data is both investing in and working with companies who are supporting that apps marketplace for Clover to provide solutions that are going to help small businesses,” he said. “We have two other investments we’ve made, in the last two months actually, both of whom have apps in Clover and both of which address the needs of small businesses.”

First Data Ventures isn’t only looking for marketers to partner with. If a company or startup offers a technology that will improve its product, Donat is all ears. He says the bottom line is First Data wants to invest in companies that will improve its bottom line.

“I’d say (partnering with LocalVox) is very aligned with our overall strategic goals of bringing innovation and solutions to our customers,” he said. “And we in the Ventures team are trying to find the most innovative solutions we can find that when combined with the First Data assets of distribution, merchant reach, payment processing, high security…that there’s a way we can bring those two together to support our customers.”

Mason Lerner is a contributor to Street Fight.

  1. Tom Cannon
    August 21, 2014

    First Data is a master at making money. Margins have always been about expanding services and filling needs in the payment related chain. basic transaction clearing is ubiquitous.

  2. Sam
    August 27, 2014

    SEEKING PARTNER INVESTOR Brief introductory note; My name is Sam Smolkin, currently residing in Hollywood, Florida.

    Invented and Patented a new innovative Internet Value Transfer System that offers, a safe secure, payment solution for all E-tailing, as well as for “Hi-Risk” (HR) sites; utilizing a Biometric Smart Card Closed System (competitively priced). No Chargebacks, No Credit Cards, No Identity Theft, Currently processing HR transactions costs any where from 4.5% to 11.5% (not per annum, per transaction and in some cases higher, depending upon volume, and number of charge backs. Additionally there is a constant scurrying around to find non-coded cards, and new avenues for processing said payments, not to mention identity theft. Current estimates for revenues from internet gambling sites alone, is in excess of $15 Billion. Adult sites, and online Pharmacies produce an additional $1.5 Billion. What percentage of that market can we capture offering the lowest available processing Fees?

    As for “normal” E-tailing, studies have indicated that 50% of potential sales (items placed in Shopping Carts) fail to materialize at Checkout, when apprehensive purchasers are prompted to enter Credit Card info online at encrypted web pages, which is then stored in Merchant’s Server. Today, the Public is very much aware of the extremely intrusive spyware and malware that exists, and how easily a “Keylogger” can be placed” in their computers, as well as the hacking of a Merchant’s Server. Furthermore higher fees are charged for transactions online, than for a purchase where the card is swiped on point of sale device. I may be able to offer a solution that could possibly salvage much of that sales potential. Seeking partner(s) and/or investor(s). Sending this document to you and your Company was not done by random selection, but rather as a result of diligent research.

    To sum it up, If you find any of the above facts of value, I would very much like to meet with you and discuss it further. My email address is: and my home phone number is 954-929-7161.

  3. Davey
    August 27, 2014

    First Data is amazing.

    Too bad LocalVox is a joke. Glorified cold-call center with a sub-par product that peaked 2 years ago.

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