ShopKeep.com Inc., a provider of tablet-based point-of-sale technology, on Wednesday announced the formation of a new payments division built around its long-time independent sales organization partner, Payment Revolution LLC, which ShopKeep has acquired for an undisclosed price.
Payment Revolution co-founder and chief executive Etie Hertz is now senior vice president of payments at ShopKeep. Both companies are based in New York City. Payment Revolution, which also has an office in Northbrook, Ill., will continue to operate its ISO business in addition to supporting ShopKeep’s payments initiative, according to Hertz.
Founded in 2008, ShopKeep provides cloud-based business-management software for about 15,000 businesses that use Apple Inc.’s iPad. Until now, the company hasn’t provided payment services directly, but it has referred merchants to Payment Revolution for about five years. “A decent portion” of ShopKeep’s merchants are Payment Revolution customers, according to Hertz, declining to offer specific numbers. The other merchants contract with the ISO or merchant acquirer of their choice.
ShopKeep’s acquisition of Payment Revolution resulted from merchant demand, Hertz tells Digital Transactions News. “This transaction was born out oyf [merchants] wanting ShopKeep to provide them with more than point-of-sale,” he says. “It came about very naturally.”
In a statement, ShopKeep president and chief executive Norm Merritt said that ShopKeep has expanded into data services and analytics, gift cards, marketing-software integrations, and now payments. “With ShopKeep Payments, merchants can have all of their point-of-sale needs in one place, with transparent pricing, customized rates, award-winning 24-7 customer support, no termination fees, and no contracts,” he said.
Hertz says the philosophy of both companies has been to offer merchants straightforward pricing along with leading technology and customer service. Founded about a year after ShopKeep, Payment Revolution began business at a time when bundled pricing was the norm. Such plans often left merchants unaware of or confused about how much of their payment expenses went to interchange and how much went to the merchant acquirer, according to Hertz.
“A lot of guys were getting into long-term deals, didn’t know what they were paying,” he says. Payment Revolution uses the so-called interchange-plus pricing model, which specifically breaks out interchange and the processor’s costs. “The only way to be transparent with the merchant was interchange-plus,” Hertz says.
ShopKeep merchants who don’t process payments through Payment Revolution can continue using their preferred processor, and ShopKeep is not planning any program to get them to switch to Payment Revolution, according to Hertz. “ShopKeep has always been payment-processor agnostic and respects its ISO partners,” he says.
Payment Revolution processes about $1 billion in annualized charge volume for an undisclosed number of retailers, restaurants, and other small and mid-size merchants. Its sponsor bank is Wells Fargo & Co., and it uses First Data Corp. for back-office processing. ShopKeep’s merchants generate about $4 billion in charge volume annually.
“It would appear that Shopkeep would like to increase opportunities to retain their customer base and add a revenue stream by incorporating a payments option into their offering,” Thad Peterson, senior analyst at Boston-based Aite Group LLC, says by email. “This makes sense from ShopKeep’s perspective, and for the ShopKeep merchants who like to keep things simple, it’s probably a good idea. And, others can still use their own processors if they choose.”
Technological advancements, however, eventually may work against the model of integrated payments and business-management systems, Peterson adds. “In the long run, it seems to me that the trend is toward more, not less, choice in payments and commerce,” he says. “I envision completely open platform plays where merchants can choose from an array of providers for a number of different services.”
ShopKeep became one of PayPal Inc.’s partners in 2013 as the online-payments subsidiary of eBay Inc. attempted to establish a major presence at the point of sale. It’s been a difficult effort for PayPal, but ShopKeep still works with PayPal, according to a ShopKeep spokesperson, declining to give details. “The relationship we established with them a few years ago … is still intact,” she says.