ShopKeep — the NYC-based mobile payments startup founded by a Brooklyn wine shop owner to help other merchants improve their services with iPad-based payment apps and analytics — is growing. The company has acquired another startup, Payment Revolution, and will now offer payment processing as part of its point-of-sale platform, under a new name, ShopKeep  Payments.

This is an agnostic solution, CEO Norm Merritt told me, which is capable of working with the likes of Apple Pay but also whatever other payment methods and mobile wallets come down the pipeline. ShopKeep is currently “just shy of 15,000 merchants and basically profitable at the margin”, but because it’s also investing in more customer acquisition, it is “unprofitable by choice” at the moment.

The terms of the deal are not being disclosed but from what we understand, it is a tech and talent grab, with Payment Revolution’s CEO, Etie Hertz, taken on a new role at ShopKeep as SVP of Payments.

While Payment Revolution was a bootstrapped startup (and, as with so many of these, quite under the radar as a result), ShopKeep has raised just under $40 million, with $25 million of that coming in the form of a Series C led by Thayer Street Partners with participation from individual investors like Tom Glocer.

Payment Revolution is not a stranger to ShopKeep: the companies were already partnering together in cases where merchants needed payment processing services alongside new POS software.

“We speak to a lot of merchants every month and a lot of them are looking for partners for payments processing, so we would pass them off to Payment Revolution,” said Merritt in an interview.

Adding Payment Revolution to the bigger solution, will mean an even more simplified product offering that caters to the sometimes unpredictable nature of running a small business, and to the fact that many small merchants have no interest in becoming technology nerds on the side.

“Most merchants do not have the time to research the intricacies of payment processing, and because ShopKeep has such transparent pricing options, many of them have requested a simpler payments solution from us,” Merritt said. Features that ShopKeep offers are transparent pricing plans, customized rates (basically that change depending on what kind of business you are), 24/7 customer support; and importantly no termination fees and no contracts.

This also makes some business sense for ShopKeep because the initial contract with a merchant can now potentially reap better margins and more recurring revenue. And it also gives the company a stronger position versus the competition, of which there is a substantial amount, including Square, PayPal, Google, Groupon, Amazon and many, many more.

“There are a lot of folks who are trying to meet the need of merchants in this space,” Merritt acknowledged, but he also noted that ShopKeep has built a position distinct from them. “One thing that sets ShopKeep apart is that we were started by a merchant,” he noted. “That DNA means we have a good reputation. We are on their side.”

The company, Merritt said, is currently in the process of raising a Series D round of funding to continue its expansion. “Right now it’s about building marketshare and getting more merchants to adopt all this new technology,” he added.

The payments industry had a huge year in 2014 and it’s showing no sign of slowing down. On the one hand tech giants like Amazon and Apple released new products that affirmed their long-term payments ambitions (Apple Pay and Amazon Local Register). On the other hand startups such as Stripe and ShopKeep continued to carve out market share, challenging older players like PayPal and VeriFone.

Understanding this complex and rapidly evolving space can be challenging. In a new explainer, BI Intelligence offers a high-level look at the payments industry — how it functions, who the key players are, and the trends shaping the industry. We start by explaining payment-card processing, since the majority of consumer payments and transaction volume flow through this system. From there we take a look at how consumers’ move to mobile devices is changing the way we pay, and which players stand to benefit.

Here are some of the key takeaways:

• The ecosystem for credit- and debit-card processing involves a complicated set of players interacting to process every transaction. Five types of players are involved: acquirers/processors, issuers, card networks, gateway providers, and independent sales organizations (ISOs).
• To process a typical transaction, three steps must occur: authorizing, batching, and funding. Each participant in this process takes a fee off of the total volume of a transaction. The remainder is deposited in a merchant’s account.
• Three trends will shape the payment-card-processing ecosystem from 2015 onward: the EMV security migration, rapid development of new payment technologies, and the massive card-fraud problem in the US. While none of these developments will completely upend the incumbent system for processing payments, each will disrupt key players.
• The mobile point-of-sale (mPOS) is going to have a massive impact on the payments-hardware and payments-software industry. By 2019, we forecast that nearly 80% of US retailers will have implemented a mPOS device. The move to mPOS will continue to put pressure on hardware providers that compete directly against mPOS devices, as well as ISOs that sell legacy devices to merchants.
• While the payment-card-processing system as a whole isn’t in danger, the proliferation of mobile devices will have a significant effect on the way we pay.

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