Article

Clover Station takes on tablet POS market

The payment processor First Data acquired Clover and the loyalty platform Perka as part of its market growth strategy.

February 12, 2014

By Robin Arnfield

Contributing writer

The U.S.-based processor First Data is hoping to make inroads into the tablet and mPOS markets through its acquisitions of mobile payments firm Clover Network and mobile loyalty provider Perka.

First Data bought Clover in December 2012 and Perka in October 2013.

At the National Retail Federation's Big Show in New York in January, First Data showed off the Clover Station, an Android tablet-based POS system that it developed with the Clover team. The Clover Station includes a touchscreen, card reader and receipt printer, and accepts a variety of payment methods including credit and debit cards, cash and checks. First Data plans to add the ability to accept payments from mobile wallets on the Clover Station.

"The Clover Station competes with mPOS offerings from the likes of PayPal and Square, especially for small merchants," Celent senior analyst Zilvinas Bareisis said. "In addition to payments, the Clover Station offers other services such as book-keeping, CRM (customer relationship management) and inventory management. The card acquiring business has always been commoditized with low margins, and now, due to pressures on interchange and merchant service fees, acquiring is becoming even more difficult. So, like a lot of acquirers, First Data is looking for ways to grow its market share by adding value."

"MPOS is the only true disruptive technology at the intersection of mobile and payments," Yankee Group analyst Jordan McKee said. "Its impact on acquirers has been tremendous. Square has flipped the traditional distribution model on its head, allowing micro-merchants and small merchants to accept card payments without having to establish relationships with acquirers. First Data's purchase of Clover is a direct response to this. Clover will allow First Data to better serve the growing mobile needs of its existing client base while allowing it to capture new business currently being lost to other mPOS vendors."

Rollout

By buying Clover and Perka and creating the Clover Station, First Data can offer merchants a one-stop-shop payments and loyalty hardware and software solution, Pradeep Moudgal, director of Mercator Advisory Group's emerging technologies group, said. "First Data plans to offer iOS- and Windows-based Clover Station tablets in the future, but for now it is sticking with Android. I saw the Clover Station at NRF, and was quite impressed with its level of sophistication and user-friendliness."

First Data will commercially launch the Clover Station during the first quarter of 2014, following trials with Bank of America Merchant Services and hundreds of U.S. small business clients during 2013. Bank of America Merchant Services is an acquiring joint venture between First Data and Bank of America.

"First Data is making the Clover Station solution available to additional U.S. bank and strategic partners at commercial launch this quarter," said Ben Love, vice president of product at Clover/First Data.

First Data will roll out the Clover Station and Perka's loyalty technology in strategic countries worldwide during 2014 through its global distribution network, he said. Perka's technology is already being used by merchants in all 50 U.S. states as well as in Canada, the U.K., Australia, Africa and Latin America.

"The Clover Station is best suited for smaller businesses that have $100,000 to $10 million in annual revenues and one to 25 physical locations," Love said. "This is a merchant segment that needs a more robust payment system than micro-merchants require. Initial vertical market targets for the Clover Station include quick- and full-service restaurants, personal services and retail."

Open platform

The Clover Station is an open, cloud-based solution that allows merchants to connect to First Data via Ethernet hard-wired links or a wireless connection. They can also conduct transactions on the Clover Station in offline mode when the Internet is down, First Data said.

Payment card transactions are stored in the cloud using First Data's TransArmor tokenization system. Tokenization involves replacing card numbers while in transit and in storage with randomly-generated numbers that can't be deciphered by criminals.

Merchants can download apps created by third-party software developers for specific vertical markets from the Clover App Marketplace, which they can run on their Clover Station.

"The POS industry is moving to software being available on the cloud," Bareisis said. "POS software is becoming less proprietary, which means that a wide range of developers can write apps for a vendor's POS devices."

"The Clover app store provides a highly flexible set of software tools, which merchants can use to customize their Clover Station," Rick Oglesby, a senior analyst at Aite Group, said.

One example is the "Tables App," which provides full service restaurant management, including the ability to configure the number of seats available, send orders per guest and assign and transfer tables between servers.

With the Clover Station platform open, Love expects many alternate payment methods to become available for use with the system. "Clover is actively working with the development teams for several significant mobile commerce applications to bring their products and services to small businesses on the Clover Station platform," he said. "This will include consumer-facing apps enabling them to make payments using their smartphones."

Perka

Perka provides a smartphone-based loyalty platform for small and medium-sized merchants, billing itself as a mobile alternative to the paper punch card.

When customers make a purchase at a participating merchant, they check in by using the free Perka smartphone app or by SMS. The check-in displays the customer's name and how actively he or she shops at the store on the merchant's mobile tablet, Web page or linked point-of-sale system. The merchant validates each purchase as consumer continue collecting points until they have enough to redeem for selected rewards.

"Perka enables customers to get personalized offers from merchants both when they are in the store and out of the store," Oglesby said. "This is transformational."

"First Data has integrated Perka's loyalty technology with the Clover Station, so that the Clover Station knows about the Perka loyalty points that a customer has on their smartphone," Moudgal said. "A consumer can go to a coffee shop that has a Clover Station, and pay for a coffee and sandwich in real-time with their Perka-based loyalty points at the Clover Station."

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