New Leaf CEO: “The Vision Hasn’t Changed” as Payment Tech Heats Up

The checkout counter at your neighborhood hangout has become one of the hottest pieces of real estate in technology.

Younger companies like Square and Groupon are pushing digital cash registers based on the iPad, and the software that goes along with them. Heavyweights like PayPal, Amazon, and Google are in the mix too, with digital wallet apps and other products aimed at “real world” retail.

Meanwhile, legions of startups are hawking payment processing services, custom smartphone payment apps, marketing analytics software, and more.

Standing on the other side of this scrum are people like Sarah McCrary, the new CEO of Leaf.

Promoted to the top job in May as a replacement for co-founder Aron Schwarzkopf, McCrary is steering the Cambridge, MA-based company’s strategy on behalf of corporate parent Heartland Payment Systems, a major small-business payment processor.

McCrary

McCrary

As we previously reported, Heartland (NYSE: HPY) bought a 67 percent stake in Leaf last year for $14.5 million in cash, making the formerly independent startup a key part of Heartland’s push to compete against the onslaught of tech-industry competitors.

Leaf sells an Android-based tablet system for taking orders and making payments, built around its own customized version of the Google-owned operating system. It connects to other devices that a merchant uses, like cash drawers and ticket printers, and offers online software to help track sales, inventory, and other information.

Other industry incumbents are taking a similar approach. NCR, the venerable cash-register company, has its own iPad-based point-of-sale system called Silver. First Data, another large payment processing company, quietly acquired payments startup Clover and has rolled out a sleek cash-register replacement under that brand.

Although Leaf is under a big, publicly traded company’s umbrella, it still has the feel of a startup—earbud-wearing employees working away in comfortable corners, inspiring slogans and plans for a new logo adorning the walls, and a test room where they can check out competing hardware products.

In her first interview since taking the top job, McCrary declined to discuss any reasons for Schwarzkopf’s departure. But she did say Leaf was committed to its mission of building a new platform for small-business technology services, with hopes of getting enough hardware in merchants’ hands to make the Leaf system attractive for outside developers.

She praised the company’s “tremendous leadership team,” which includes Leaf co-founder Sebastián Castro Galnares, who remains onboard as the company’s chief hardware and technology evangelist.

“The vision of the company hasn’t changed at all,” McCrary said. “We’re executing as strong and fast as possible on the same vision that I think Aron and Sebastian started the company with.”

If the vision is the same, it seems likely that Schwarzkopf’s departure had something to do with execution. A year ago, he told us that Leaf was processing the equivalent of $55 million in annual sales for its customers and expected that to increase nearly tenfold by 2014.

But startups can be expensive to run: Heartland has reported that Leaf lost $2.7 million in the first quarter, and has predicted the startup will continue to cut into its earnings for the rest of this year.

McCrary was a little more circumspect than her predecessor about Leaf’s progress. She declined to give any specifics about the company’s size, but said it has “thousands” of its tablet devices in customers’ hands across the country.

“Leaf did a tremendously good job at getting their concept out, building a product, finding acceptance in the market—and that’s what was attractive to the partners and investors,” McCrary said. “So we’re in a privileged position now, where we’ve got the backing to take our roadmap and pursue those ambitions.”

Leaf plans to expand by partnering with more resellers, which specialize in getting hardware into the hands of America’s millions of small and medium-sized businesses. Parent company Heartland already is serving that function, but McCrary says there are about 80 sales organizations partnering with Leaf, and another large-scale distributor expected to be announced soon.

“We’re relevant enough that we have large distributors that want to work with us,” she said.

The company also wants to add more customers that have table service, taking advantage of Leaf’s portable hardware—the 7-inch tablet is designed to be disconnected from its countertop base station and carried around, which means a waiter could be getting orders in and payments completed faster than by using a pad and pen at the tableside.

The ultimate goal, however, is bringing developers to the party. In the next year, McCrary said, perhaps the most critical sign of success for Leaf will being getting another point-of-sale company to build their software for the Leaf system.

“We want to see a third party developing a marketable P.O.S. for a vertical that they know and love and can succeed in,” she said.

“Who’s to say that isn’t already happening?” Galnares added with a smile.

Not so long ago, running a retail counter was a relatively ho-hum element of American business. Store owners bought a register and card swiper, hooked them up, and ran the things until the wheels fell off. If you’re running a family restaurant or modest corner store—especially if you managed to survive the Great Recession—just keeping things together and paying the bills is enough to concentrate on.

Galnares

Galnares

Winning over those business owners with a next-generation replacement is no easy task. Sure, the advanced software can help you track all of the key numbers for your business. Yes, being able to accept more payment options from smartphone-toting consumers is probably a good thing.

But most of the players trying to make headway in this field are really just hoping they’ll be in position when business owners decide to switch—a process that could be dragged out until a younger generation of small business owners takes control of the cash registers.

“The vast, vast majority of merchants are running legacy systems. And I think more than any singular competitor in our direct space, we battle against educating our prospective customers about all the great benefits that a mobile commerce platform like Leaf brings,” Galnares said. “Everyone in this space still battles that one major competitor of `I don’t know what this is. I don’t know if I just want to go away from my block, 1980s, Casio-esque credit card terminal.’ That’s the major competitor that everyone faces.”

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