In a recent conversation with an investor in the payments world, the question came up about the better strategy to win in the long term:
“Should ISOs & acquirers compete for the control of the POS or should they focus on a vertical?” asked the investor.
I believe both. It’s the only to grow sustainable and at a healthy rate over the long term.
First Data and Heartland Payment Systems came up as examples of companies controlling the POS as a strategic positioning.
I replied that in my eyes, those are very different strategies.
Heartland’s purchase of PC America and Dinerware is an investment in the integrated POS solution, agreed. But the vertical focus of Heartland in the restaurant business is a huge advantage that First Data doesn’t have.
First Data’s investment in Clover is a way to control the POS. But my money is on Heartland in the long run. On top of buying the functionality, they are extending horizontally by investing in other solutions (queue management, reservation management, etc.) for restaurants creating therefore relevance in the merchants’ life.
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In other words, Heartland Payment Solutions is winning the relevance war in the verticals it has chosen. In a few years, when a restaurant owner thinks of an overall solution, Heartland will be the only choice they think of.
By not being explicitly vertically focused, First Data ends up competing in brand preference: being a choice among two or three others in the eye of the merchant.
You can learn about vertical specialization strategy and 2 other strategies to compete effectively in merchant acquiring in our: Strategic Differentiation Executive Presentation.