The rumor mill has people asking if Shift4 acquired MerchantLink, a payments gateway that became popular in POS circles when they formed a tight relationship with Micros that was later litigated as a tying arrangement by Bob Carr and Heartland. While a competitive sale process was undertaken, it appears that Shift4 has come out as the highest bidder.
But why would anyone bid on MerchantLink?
MerchantLink publicly claims 500,000 merchants. On the Micros side of the house that number is surely dwindling. Our latest estimates put the total number of US Micros RES sites down to about 20,000 – that’s 30,000 less than their peak only five years ago. Most Micros resellers were kicked out of the Micros network upon Oracle acquisition, and Oracle has been trying to move enterprise sites to Simphony while the mid-market RES sites languish.
And gateways are not exactly en vogue these days. In case you haven’t heard, every software company with a pulse has realized there’s free money in payments processing. These software providers (or ISVs, for independent software vendor) have started looking at PayFac business models to grab some of that free cash. When the software provider offers their own processing, increasingly via PayFac, they have less desire to provide optionality on the processing side of the house. Thus the falling market share for gateways.
All in all MerchantLink would appear to a business on the decline. But that might have been Shift4’s opportunity.
It should come as no surprise to our readers that Shift4 continues to impress us with their culture and willingness to innovate. So while most of the payments industry is playing Hungry, Hungry Hippos, Shift4 is playing chess (yes, the rest of you haven’t even graduated to the checkers board).
Shift4 quietly picked up several C-suites from Micros over the past few years. Would it be crazy to think that these relationships bring deep technical knowledge and business rapport that give Shift4 unfair insight into MerchantLink? That while most processors view MerchantLink as a conventional portfolio play (for example, they buy the merchants in the portfolio, pray some convert to their processing, and then ultimately lose those accounts as some ISV earns the payments business with actual value) Shift4 has a longer term strategy with better crossover synergies?
We think so. Look at the POS systems mentioned in a Shift4 press release for SkyTab for instance. You expect to see the POS systems in Shift4’s own portfolio, but look at the lone system listed that’s not in their portfolio:
Because Shift4 has been willing to invest capital and build practical solutions they were likely able to rationalize a higher acquisition price than other processors. It’s almost like quality product creates optionality and lifts IRR… amazing.
Current MerchantLink restaurants have reached out to us to ask what’s going to happen with their current MerchantLink integrations. For most of them, nothing. For the customers on an old, old version of MerchantLink (like so old there’s no P2P or EMV) they’ll need to update as Shift4 deprecates support for these older versions. Here’s what Shift4 had to say on the matter.
Merchant Link operates north of six unique gateways. Four that represent the largest portion of the MerchantLink customer base are fine and will continue to operate. But two of the MerchantLink gateways – the oldest ones – do not support P2PE and EMV and were shown to be liabilities during our diligence efforts. Those two gateways are being shut down. There is an active outreach campaign underway to help these customers migrate to the Shift4 platform. They will not have to pay any software upgrade or migration, we will provide them free EMV readers and free Skytab devices, and other benefits to move over. They may also elect to go to any of the other dozen-or-so Oracle Payment Interface certified providers if they so choose.
Shift4 representative
So yes, MerchantLink has found a new home, and frankly it might now be under better supervision.
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