Payments

Year Old Secret Exposed: First Data Acquired Clover And Releases A Surprising POS System.

A Story About The Dedication Of VCs Like Andreessen Horowitz And The Little Company That Is Now Helping A Very Big Company

In my view Clover is the little startup that had really great talent but not the right “story” to be attractive to most Venture Capitalists and a vast majority of Tech writers.  Ah but this did not stop the really great minds at Sutter Hill Investments and Andreessen Horowitz, quite early on they saw the promise of Clover and some of the really great technical talent they had and, invested. This investment paid off in a major way.  As the payments market became over crowded and the noise level became too high for anything but a few companies, Clover got lost in the shuffle.  But someone took notice.

Clover + First Data = Clover Station

Today it was made public that Clover was very quietly acquired by the most massive payment company on the planet, First Data.  I have known of this relationship for quite some time but could not could not acknowledge it and saw early examples of what was announced today.

John Beatty, Clover co-founder and co-president and his team has expertly guided Clover through a number of identity changes.  John has assembled a very talented group of artists and artisans.  But in today’s announcement was something quite interesting a surpassingly beautiful designed POS system, that has been brilliantly guided by the very talented Annie Lausier (also a Quora admin, multitasking!).  Called the Clover Station it is a dedicated Point Of Sale system based on a built-in and  secured version of Android wrapped in a distinctive case that also comes with a matching receipt printer, cash drawer and barcode reader.clover3

The design is quite stunning and amazing to view.   This is the fine craftsmanship of designers that helped  IDEO, Tesla, and Palm.  The POS is brushed aluminum for the bases of the Station and came up with a patent pending swivel for the screen so the merchant can quickly move the screen from merchant view, to customer view, and back.

clover1The matching printer is a first in this category as no other  iPad/Android POS company has attempted to create a printer.

clover2It always struck me as odd as I advised a rather well known payment startup that was very, very focused on design, that at the very least the design aesthetics would be impacted by a generic off-the-shelf black Epson printer.

clover4Creating your one printer also allows for the potential of lower costs as there are 100s of companies that build subassembly printers at very low cost.

clover5The cash drawer is also a perfect match and again, not an off-the-shelf afterthought looking device.

clover6Dedicated Hardware Is Brilliant For Fault Tolerance  

The level of design and detail that is crafted in Clover Station is really quite amazing.  Nothing is left as an afterthought.   The system is logically designed with an integrated Android tablet.  This is an import aspect of the Clover Station.  By creating dedicated hardware many of the very large points of failure are contained.  Other companies that are requiring that a merchant supply their own devices can create a huge failure point because of the huge spectrum of devices and software configurations that are available.

The Clover Station can be set up in less then a half hour to the first transaction.  There is quite a bit of assistance along the way in the software and soon though the over 1,000 person strong First Data customer service system.

The major features to Clover Station are:

  • Open Clover App MarketPlace that allows integration of advanced POS and business solutions
  • Merchant analytics with tools to access and use customer data
  • Payment card data securely stored in the cloud with the TransArmor® tokenization service
  • 24x7x365 customer support with live agents and additional self-service tools
  • Offline mode with ability to conduct transactions even when the Internet is down
  • Patent-pending swivel arm technology to differentiate merchant and customer-facing positions
  • Cash drawer, printer and other peripherals that coordinate seamlessly

Developers Welcomed: Open APIs  

The real difference between this system and many other systems in the market today is the radically open architecture and APIs that Clover crafted.   The platform Clover created is really quite powerful.  It allows developers to build on the base system and make Clover something far more specific for the 14,000 specific merchant segments.   This is is far contrast to other platforms that take a one size fits all approach.

Apps for Clover can take many forms:

  • An Android app that runs on a Clover point-of-sale device using Clover Services on Android and/or using the REST API
  • An Android apps can be deployed through Google Play and uses the REST API
  • A webapp, either server-supported or a pure HTML/JS using CORS, that uses the REST API
  • A server-to-server app that uses the REST API

All of this can be combined into multiple API calls. For example, a table reservation app might:

  • Perform server-to-server calls to take consumer reservations
  • Provide an Android app that runs on the merchant's Clover device to view and manage reservations
  • Provide an iOS app to provide reporting and analytics to the restaurant owner.

First Data Is A Payment Card Processing Powerhouse

First Data is perhaps the largest company in the world that few people outside of the payments industry would recognize.  It is very hard to explain to even knowledgeable business experts just how large and pervasive First Data is.  They just about touch 90% of all transactions in the US directly or indirectly.

clover9First Data not only processes directly for in house accounts but processes under contract for Bank Of America, Wells Fargo, Citibank and quite a few other banks.  This represents over 70% of the processing in the US.

Ultimately, Over 300,000 Experienced Salespeople Will Sell Clover Station

First Data’s networks and banking relationships will have the exclusive merchant processing relationship with Clover.  However for the first phase of the roll out of the Clover Station, Bank Of America will have the exclusive distribution rights.  As time moves on over 300,000 merchant account salespeople will be selling this programs to millions of small and medium sized merchants in the US.  The first stop for most merchant sales companies will be to convince existing merchants to give up stand-alone credit card terminals.  But as time moves on, there will be a blanket of marketing for this new system.

Of course there are quite a number of POS systems and companies.  Clover Station is quite new and will go through a bit of a learning curve.  Existing POS companies may begin to feel some heat as this type of product, with First Data behind it and the thousands of salespeople selling it make some impact.

The price points will span from less then $2,000 to no purchase low monthly lease programs.  As the system is made available to more selling channels one will expect many options.

Merchant account rates and monthly fees will also span from fixed fee pricing to highly discounted Interchange pass through prices.  Merchants will have quite a number of options to choose from.

Other Fine Companies Doing Something Similar 

The only company that was way ahead of all of this was the amazing Harbortouch.  This company really pioneered the way for very wide adoption of POS systems.  They created a rather unique and robust offering that continues to break sales records.   Harbortouch does not use the same channels of distribution as the vast majority of POS companies, they have highly trained and highly motivated independent  salespeople.  They have also pioneered complete end to end white glove installation and support.  And do this with no POS purchase needed, it is all leased for a low monthly price point.

I see both companies coexisting in the market quite well and in some ways may be complementary.  However I see a large potential for developers also as open systems become the standard.   Currently the top three POS companies are closed systems and require an ”act of god” to get any developer access.  This to may create market forces of change.

Square will face a rather large one-two punch.  They do not have an open API and the company has pretty much stated they will not entertain this option.  Thus Square’s closed system locks it out of the developer ecosystem that I predicted in 2010 would become a central part of the new payments landscape.  Square also needs to own the merchant account aspect to justify the current business premise.  This has limited the uptake of the Square Register and Square Stand for dozens of reasons.  By wanting the part of the business that earns the least amount of funds, merchant processing.

Support And Vision From Investors Like Andreessen Horowitz

Some credit should be given to all the investors including Andreessen Horowitz for not only identifying the promise of Clover, but supporting the company during a very hard time as the company adjusted to the very competitive and saturated market.  So many VC firms would have essentially liquidate the company and took loses.  Having the right support I am certain allowed the company to be matched with First Data.  I do not normally site VCs as so very key to a companies success, but in this case I am certain it is warranted and Marc Andreessen and Ben Horowitz guiding wisdom is the reason.

A New Standard For Big Company Innovation

To many in the tech world the idea of First Data innovating may not sit quite right.  This is a fair assessment, they are a very large company and frankly take far too long to respond.  However paired with the innovation we see at Clover, this combination may set a new standard on how large companies can quickly innovate.  First Data has a hands off relationships with Clover that will allow the company to continue to grow and create.  First Data has great talent and wisdom that will allow Clover to be far more successful then most payment startups.  They are far from finished.

It is really great to see this scrappy little company that refused to give up make such a big impact in payments. Well done, well done.

Brian Roemmele

Brian Roemmele, is a mobile payments expert and an avid blogger at Quora. His profile can be found at http://www.quora.com/Brian-Roemmele. Brian is an Apple enthusiast and has deep interests in writing about new technology in payments.

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