Heartland Hedges Its Bets As It Moves Upmarket

What's Next In Payments®
2:48 PM EDT January 20th, 2013

By Ben Carsley, Writer/Editor (@BC_PYMNTS)

Heartland Payments is already a well-known commodity in the payments industry. With a large part of the U.S. restaurant POS share, about 20 percent of the gas convenience industry, and predominance in the K-12 and collegiate market as well, Heartland established itself as a key POS player long ago.

Now, Heartland Payments is setting its sights upmarket on a new industry – retail – and so it’s no surprise that I ran into the company at NRF 2013’s tradeshow, Retail’s BIG Show, last week. David Hogan, executive director at Heartland Payments, was kind enough to sit down with me and discuss his company’s new motives, what he made of NRF’s mobile focus and his thoughts on which payments technology would ultimately prevail.

While Hogan has been at Heartland for around a year and a half, his experience in the retail industry is extensive. Hogan spent many years with the NRF as their CIO and, in his own words, is quite familiar with the environment, the players and is well connected within the industry.

So what did Hogan cite as Heartland’s plan as they aim to appeal to more traditional retailers? Why key technology will Heartland place its bet on, and which side will they take on the NFC debate?

According to Hogan, the only bet Heartland is making is, essentially, a hedge.

“We just want to be viewed as Switzerland, to be quite honest with you, and enable our merchants to connect with whoever, anytime they want,” Hogan said. “That’s what I think our goal is, just to make this as frictionless as possible for them.”

“We’re listening to our merchants, and our merchants are very interested in mobile, and they want us to play with the different players that are out there and support them.”

It’s a solid strategy given the uncertainty in the industry right now, which Hogan likened to a “high school science fair.”

“You’ve got all these different players, from a merchant perspective, they’re trying to figure out, where do I place my bets on some of this stuff,” Hogan said.

Hogan explained that Heartland’s strategy is simply an acknowledgement that neither they, nor anyone else in the industry, really know what’s going to take off in the payments industry. Nor do they have a firm grasp on a time frame for when a massive shift in consumer payments will occur.

“We don’t know, we just want to make sure that we’re at the forefront, we’re working with the right players, and whatever source … to be quite honest, I have no idea what’s going to happen,” Hogan admitted. “There could be something in two years that comes up and everyone goes ‘wow, that’s the one,’ and we’ll be there for that as well.”

“But from a consumer perspective, I think the consumer right now has got to be a little bit confused about what’s going on in the marketplace. No one has really answered the question yet: What’s in it for the consumer?” Hogan noted.

That’s a sentiment that I heard echoed throughout my time at NRF 2013. Just the ability to make a payment is generally viewed as too insignificant to drive consumer change. As I highlighted on Friday, not everybody believes that, but many still do, and that’s what makes value-added features so important.

Is your average consumer going to switch to NFC or digital wallets just because it’s “cool?” That’s a dubious assumption. Will they switch if its cool AND they earn rewards or offers? That’s much more likely, and something Hogan brought up towards the end of our talk.

“Once you incentivize the consumer to act in some way that’s appreciably different from what they’re doing right now, then I think you’re going to start seeing a tipping point, at least form a mobile payments perspective and a mobile loyalty perspective. But right now, I just think that it’s a little bit confusing out there, and I think it’s going to be several years before we sort this out and we start seeing some good traction within the industry,” Hogan noted.

“The consumer is fickle, and we just don’t know what’s going to happen. The consumer is going to gravitate towards what they like, and it could be NFC, it could be some of the cloud-based solution that’s out there. I think there are going to be multiple options out there, but is there going to be a clear leader that’s going to take off,” Hogan asked. “I’m not too sure I can answer that.”

No one can right now, which is why neutrality – becoming payment’s Switzerland, if you will – sounds like a sound strategy to me. If upmarket retailers start flocking to Heartland with the same enthusiasm that those in the restaurant industry have, we’ll gain some insight into how merchants feel, too.

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