Shift4 Payments Stock

Shift4 Payments, Inc. provides software and payment processing solutions in the United States (U.S.) based on total volume of payments processed.

The company distributes its services through a scaled network of seasoned internal sales and support teams, as well as through its network of software partners. The company’s software partners are consisted of independent software vendors (ISVs) and value-added resellers (VARs). For its software partners, the company offers a single integration to an international end-to-end payment offering, a proprietary gateway and a robust suite of technology solutions to enhance the value of their software and simplify payment acceptance. For its merchants, the company provides a seamless, unified consumer experience and fulfill business needs that would otherwise require multiple software, hardware and payment vendors.

The company’s software partners rely on it to provide a seamless commerce experience for their customers, enterprise grade security, analytics, and compatibility with a wide network of other point of sale (POS) solutions. The company’s payments platform is a full suite of integrated payment products and services that can be used across multiple channels, geographies, and industry verticals, including end-to-end payment processing for a broad range of payment types; merchant acquiring; proprietary omni-channel gateway capable of multiple methods of mobile, contactless and QR code-based payments; complementary software integrations; full eCommerce capabilities, including web-store design, hosting, shopping cart management and fulfillment integrations; integrated and mobile POS solutions; security and risk management solutions; and reporting and analytical tools.

The company also offers innovative technology solutions that go beyond payment processing. Some of the company’s solutions are developed in-house, such as business intelligence and POS software, while others are powered by its network of complementary third-party applications. The company focuses on innovation, combined with its product-driven culture, enables it to create scalable technology solutions that benefit from an extensive library of intellectual property.

Shift4 Model

The company strategically built its Shift4 Model on a three-pillar foundation, such as payments platform; technology solutions; and sales and distribution.

Payments Platform

The company’s payments platform provides omni-channel card acceptance and processing solutions across multiple payment types, including credit, debit, contactless card, EMV, QR Pay, and mobile wallets, as well as alternative payment methods, such as Apple Pay, Google Pay, Alipay and WeChat Pay. The company continues to innovate and evolve its payments offering as new technology and payment methods are adopted by consumers.

Through its proprietary gateway, the company’s payments platform is integrated with over 500 software suites, including some of the largest and most recognized software providers in the world. In addition, the company enables connectivity with the largest payment processors, alternative payment rails and many different payment devices. The company’s payments platform includes market-leading security features that help prevent consumer card data from entering the merchant’s environment.

The company has designed its payments platform to be:

Integrated – fully integrated and seamlessly connected, facilitating easy data capture and compatibility across all solutions;

Reliable – supports the most demanding payment environments in the U.S. 7 days a week, 24 hours a day, 365 days a year; and

Secure – Payment Card Industry (PCI)-validated Point-to-Point Encryption (P2PE) tokenization and Europay, MasterCard and Visa (EMV)-ready solutions.

The company’s merchants have the flexibility to utilize its payments platform in one of two ways, including as a gateway or as an end-to-end payment solution. End-to-end payments merchants benefit from a single, unified vendor solution for payment acceptance, devices, POS software solutions and a full suite of business intelligence tools. By consolidating these functions through a single, unified vendor solution, these merchants are able to reduce total spend on payment acceptance solutions and access gateway and technology solutions as value-added features. Gateway merchants benefit from interoperability with third-party payment processors.

Technology Solutions

The company’s suite of technology solutions is designed to streamline its customers’ business operations, drive growth through strong consumer engagement and improve their business using rich transaction-level data.

SkyTab POS: The company provides purpose-built POS workstations pre-loaded with powerful, mission-critical software suites and integrated payment functionality for its restaurant and stadium clients. The company’s SkyTab POS offering helps its merchants scale their business and improve operational efficiency while reducing total cost of ownership.

VenueNext: The company’s mobile-first technology solution provides stadium, theme park and entertainment venues with a frictionless commerce experience. The company’s VenueNext solutions include mobile ordering, countertop POS, self-service kiosk, and digital wallet to facilitate food and beverage, merchandise, and loyalty all within a white-labeled technology application that is fully integrated with its secure end-to-end payment processing platform.

Lighthouse: The company’s cloud-based suite of business intelligence tools includes customer engagement, social media management, online reputation management, scheduling and product pricing, as well as extensive reporting and analytics.

SkyTab Mobile: The company’s mobile payments offering, SkyTab Mobile, provides a complete feature set, including pay-at-the-table, order-at-the-table, delivery, customer feedback and email marketing, all of which are integrated with its proprietary gateway and Lighthouse. This unique solution is relevant for merchants ranging from small and midsize businesses (SMB) to large enterprises and across numerous industry verticals.

The Giving Block: The company’s cryptocurrency donation marketplace allows donors to easily gift a variety of cryptocurrencies to over 2,000 charities.

Shift4Shop: The company’s turnkey eCommerce platform provides everything a merchant needs to build their business online. Merchants can create a webstore in minutes and choose from over one hundred design themes. Shift4Shop also provides merchants with tools to manage their product catalog, order fulfillment and inventory management, search-engine-optimization (SEO) and secure hosting.

Marketplace: The company enables seamless integrations into complementary third-party applications, which helps reduce the number of vendors on which its merchants rely. For example, a restaurant can enable DoorDash via Marketplace and accept orders from their existing POS, dramatically simplifying implementation and eliminating manual reconciliation of multiple systems. That same restaurant can also enable payroll, timekeeping and other human resource services, reducing the time spent on manual workflows and enhancing employee engagement. Marketplace also includes a variety of functional applications, including loyalty and inventory management.

Sales and Distribution

The company’s payments platform and technology solutions are delivered to its merchants through its distribution network. The company’s network includes thousands of software partners and regional internal sales and support hubs, providing full coverage across the U.S. and allowing it to provide the localized support that many merchants demand.

The company’s distribution approach and commitment to its internal sales team and software partners are part of its go-to-market strategy.

Independent Software Vendors: The company’s solutions are connected into over 500 integrations with market-leading software providers, including some of the largest and most recognizable technology companies in the world. By integrating the company’s payments platform into their software suites, its ISVs are able to sell a comprehensive solution to the merchant at an attractive price point.

Internal Sales and Support Network: The company has approximately 2,300 employees based throughout the country, with significant focus on sales and customer support.

Enterprise Relationships: In addition to small to medium size businesses (SMBs), the company supports its large enterprise relationships across thousands of locations. The company’s enterprise customers consist of stadiums, arenas, resorts, and airlines, among others.

Value Added Resellers: The company partners with VARs to sell its solutions to merchants. The company’s VARs include third-party resellers and organizations that provide distribution support for ISVs. VARs act as trusted and localized service providers to its merchants by providing them with software and services. This partnership enables it to expand its reach and scalability by allowing a VAR to bundle its full payments and technology product suite with other value-added services provided by the VAR.

The company is selective in identifying and choosing its software partners, and it seeks to align its business objectives with those that have strong networks, local expertise, high-quality merchant portfolios, and trusted relationships.

The company’s compelling value proposition enables its software partners to extend attractive pricing arrangements to its merchants. For merchants that subscribe to the company’s end-to-end payments offering, its software partners can offer gateway and technology solutions as value-added features included in the price of its payments offering.

Solutions

The company’s solutions are designed to help its customers grow their businesses and include, but are not limited to:

Merchant Acquiring: Omni-channel card acceptance and processing solutions across multiple payment types, including credit, debit, contactless card, mobile wallets, as well as alternative payment methods. The company also provides localized settlement for international merchants.

Gateway: Seamlessly connects merchant’s software to the payment processor of their choice enabling a wide range of payment options, including traditional and alternative payments methods and provides integrations to hundreds of software suites.

Security: Security features, including PCI-validated P2PE and EMV-compliance. P2PE encrypts consumer card data from the moment a card is inserted, swiped, manually keyed or tapped, as with mobile wallets, at a secure payment device.

Tokenization: Replaces cardholder data, which has universal value, with a random alphanumeric value (a token) that is only valuable within specific parameters and in a particular environment. Tokens enable a merchant to maintain transaction records without the risk of compromising consumer card data

Traditional tokens preclude a merchant from identifying their consumers, which undermines the efficacy of business intelligence solutions. The company’s MetaTokens provide 16-digit numeric values that remain constant for a particular consumer’s card number. MetaTokens enable a merchant to identify their consumers across multiple transactions, numerous transaction types and different revenue centers within a merchant.

Risk Management/Underwriting: Risk management teams and underwriting systems assess, plan, and implement strategies to minimize risk associated with chargebacks.

Payment Device Management: Device provisioning encryption and ongoing maintenance and support.

Chargeback Management: Chargeback system provides an efficient support structure in which the company works directly with the merchant, payment card networks and card issuing brands to determine liability and resolve open dispute claims.

Fraud Prevention: The company’s Fraud Sentry solution is an automated solution that monitors transaction activity to identify instances of employee fraud. Fraud Sentry will monitor purchase and refund activity on the POS and will notify the merchant in the event these amounts are not aligned.

Loyalty and Gift Card: Flexible, feature-rich loyalty and gift card solution for card-present and card-not-present environments.

Operations and Support Services

The company’s operations infrastructure is designed to deliver high-quality experiences to its customers and to drive efficiencies throughout the entire payment ecosystem. The company’s operations and support services include:

Merchant Operations and Support

Merchant Underwriting: The company’s merchant underwriting team manages applications and risk evaluation of new merchants. The majority of the company’s merchant base operates in end markets with high card-present volume and low levels of fraud and chargeback losses. In addition, the company’s underwriting strategy offers merchants with a low risk profile expedited activation, which enhances their customer experience.

Merchant Onboarding and Activation: A business owner can enroll for a merchant account within minutes via the company’s web-based portal within Shift4Shop. For enterprises, the company’s merchant onboarding and activation team works closely with its partners to ensure a high-touch transition from sales to implementation and activation. The company’s streamlined activation and automated approval process enables fast and frictionless merchant onboarding, providing it and its partners with enhanced speed-to-market. The company’s partners are typically able to board even the largest and most complex merchants within 24 hours of submitting an application.

Merchant Training: The company provides a full curriculum of training materials to its merchants via a dedicated training department and content delivery platform.

Merchant Risk Management: The company’s risk management operations are designed to monitor merchant accounts on an on-going basis. This includes dedicated security and regulatory support, such as PCI compliance support, vulnerability scanning, system monitoring and breach assistance. Once a merchant is activated, the company’s systems are configured to automatically monitor any activity that may require additional diligence, which in turn helps minimize losses associated with fraud and default.

Merchant Support: The company’s merchant support team responds to inquiries from merchants 7 days a week, 24 hours a day, 365 days a year. The team provides customer support for systems integrations and other technical solutions. In addition, the company has a dedicated team of merchant account specialists that guide merchants through the payment acceptance process from onboarding to settlement and reporting. With strong emphasis on first-call resolution, the company seeks to provide exceptional payment expertise and support for its merchants. The company trains its customer support team to quickly identify and resolve each matter in an empathetic and professional manner which reduces repeat calls and improves its operational efficiency.

Software Partner Operations and Support

Software Integrations and Compliance Management: The company has a team of engineers and technical support staff dedicated to support software integrations and ensure compliance with all card brand, security and regulatory requirements, including PCI and Payment Application Data Security Standard compliance support, system integration and configuration guidance.

Partner Support: The company has dedicated support teams who work with its software providers to address any questions or issues that may pertain to the integration of its products and solutions into their software suites. The company seeks to deliver end-to-end issue resolution by bringing all appropriate disciplines together in an integrated manner, in order to optimize partner support. In addition, the company helps resolve issues that may pertain to its partners’ entire portfolio of merchants or incidents pertaining to a single merchant.

Partner Services: Through the company’s partner-facing customer relationship management system, its partners are able to track each step of the activation process of their new merchant accounts in real-time. Through this system, the company’s partners can track their merchant portfolio, including commissions, residual payments and even support calls/recordings, in an accurate and real-time manner. The company has added substantial automation to these processes, which is essential to ensure optimal experience, as well as financial efficiency.

Competition

For certain services and solutions, including end-to-end payments, the company competes with non-integrated payment processors (such as Chase Paymentech, Elavon, FIS, Fiserv and Global Payments) and integrated payment providers (such as Adyen, Lightspeed POS, Shopify, Square and Toast). For the company’s hospitality gateway offering, it competes primarily with Elavon and FreedomPay.

Patents, Trademarks and Intellectual Property

The company holds 34 issued U.S. utility patents, three issued Canadian patents, one issued Mexican patent and one issued European patent related to its proprietary payments technologies. As of December 31, 2022, the company also held six pending U.S. utility patent applications related to its payment technologies. If the U.S. and foreign patents issued to the company are maintained until the end of their terms, they will expire between the year 2026 and the year 2040. The expiration of these patents is not reasonably likely to have a material adverse effect on the company’s business, financial condition or results of operations. In addition, the company owns a portfolio of trademarks in multiple jurisdictions around the world and are in the process of registering for its primary trademark, Shift4 Payments.

Seasonality

The company’s operating results and operating metrics are subject to seasonality based on historic patterns of consumer and business traveler spending behaviors coupled with exposure to seasonality experienced by its mix of merchants. In the past, the company has experienced seasonal fluctuations in its quarterly revenue with revenue typically strongest in its second and third quarters and weakest in its first quarter (year ended December 31, 2022). As the company expands into new verticals and geographies, it expects to continue to experience seasonal fluctuations. Other factors influencing the company’s quarterly seasonality include the timing of specific holidays in a given fiscal year, the number of business days in a month or quarter, and the proportion of its volume derived from various merchant businesses.

Government Regulation

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) was signed into law in the U.S. The Dodd-Frank Act has resulted in significant structural and other changes to the regulation of the financial services industry. Among other things, Title X of the Dodd-Frank Act established the Consumer Financial Protection Bureau (CFPB) to regulate consumer financial products and services (including some offered by the company’s partners).

The company is subject to the rules of American Express, Discover, Interlink, Maestro, Mastercard, Visa and other payment networks. In order to provide the company’s services, it must be registered either indirectly or directly as service providers with the payment networks that it utilizes. The company is registered with Visa, Mastercard and other networks as service providers for member institutions. The company is also subject to network operating rules promulgated by the National Automated Clearing House Association relating to payment transactions processed by it using the Automated Clearing House Network and to various state, federal, and foreign laws regarding such operations, including laws pertaining to electronic benefits transactions.

As a processor of personal data of EU data subjects, the company is also subject to regulation and oversight in the applicable EU Member States with regard to data protection legislation. The company, its partners and certain of its merchants are subject to various federal, state, and international laws prohibiting unfair or deceptive trade practices, such as Section 5 of the Federal Trade Commission Act and the prohibition against unfair, deceptive, or abusive acts or practices (UDAAPs) under the Dodd-Frank Act.

In the U.S., the company complies with certain provisions of the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, and its implementing regulations (collectively the BSA) which are enforced by the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury and the U.S. Department of Justice. The company is also subject to anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (FCPA) and other laws, that prohibit the making or offering of improper payments to foreign government officials and political figures and includes anti-bribery provisions enforced by the Department of Justice and accounting provisions enforced by the Securities and Exchange Commission (SEC).

The company is also subject to certain economic and trade sanctions programs that are administered by the Department of Treasury’s Office of Foreign Assets Control (OFAC), which prohibit or restrict transactions to or from, or dealings with, specified countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially-designated nationals of those countries, narcotics traffickers, and terrorists or terrorist organizations.

Research and Development

The company’s research and development expenses were $0.5 million for the year ended December 31, 2022.

History

Shift4 Payments, Inc. was founded in 1999. The company was incorporated in Delaware in 2019.