The major technology companies that have chipped away at incumbent payment businesses face much larger competition from this year’s big processing mergers, but they’ve also bulked up through fundraising and product development.
Part of Square’s strategy has also been to reach out to developers through its
“You want to know which channels are the most efficient and profitable, which customers are buying which products,” said Carl Perry, developer platform lead for Square.
Square is relying on the flexibility of both its Cash app and its and API, which allow the company to serve merchant needs that may not exist yet and may also be outside of Square’s core expertise.
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“People talk about omnichannel as if it’s about taking payments in two or three channels,” Perry said. “It’s really about taking orders, inventory and engaging with consumers in different venues.”
The developers’ portal enables DoorDash, Postmates and others to build technology that can serve broader merchant needs. “Any seller can run a business in a world where they have to manage in multiple channels,” Perry said.
Stripe did not return a request for comment. Stripe’s appeal to investors allows it to both extend geographically and build a larger product set. Both Stripe and Square offer merchant credit, providing a financial services element to their payment accepting business — and providing the “both sides” that that larger merged technology companies and payment processors can provide.
The story of who will win the next phase of the payments industry's’ technology revolution will be told by how well the smaller technology companies can counter the bulk of the incumbents.
The app to watch in the battle may be Clover, the First Data point of sale tablet that now has Fiserv’s backing. There are more than 30 million small businesses in the U.S., according to Ray Pucci, director of merchant services at Mercator, and their lifecycle requirements are evolving.
Square and Stripe are trying to compete with Clover’s app marketplace, which has more than 450 apps from both Clover and third parties, Pucci said, adding more than half of these apps include business operational tools such as data analytics, marketing and accounting.
First Data has made Clover a major part of its diversification strategy as it grew from a traditional payment processor to more of a software company over the past several years. Clover has helped First Data expand
“Both Square and Clover have hundreds of thousands of small business merchants looking for business services tailored to their needs. The business models of the big merchant acquirers are not designed to go after this long tail of small and micro businesses,” Pucci said.
The pressure on software developer tools also stems from the expense of hardware, which is increasing even as the industry consolidates because the need to support different payment options is adding to the expense.
“Reacting to these needs creates a need for more hardware model numbers to support different vertical markets — a costly proposition as compared to software,” said Tim Sloane, vice president of payments innovation at Mercator. “Software has higher margins, is easier to distribute and modifications can be made more easily and are easily deployed centrally.”
