The merchant acquiring sector is undergoing a period of unprecedented change. It navigated the global economic slowdown relatively unscathed, but that is not to say that it is not under pressure.
The industry is becoming increasingly competitive, and margins are being squeezed — acquirers are trying to preserve margins by offering value-added services. At present, most of the competition is between existing, often large national and international players, but new entrants present a growing threat.
It is not just price competition that is putting pressure on acquirers; increasing concern about data breaches has led to greater compliance requirements for both acquirers and merchants. Governments, particularly in Europe and North America, also have intervened to put downward pressure on interchange fees and merchant service charges.
Against this backdrop, it is interesting to review the findings of some new research published by RBR on Merchant Acquiring in Europe. The study covers six countries — France, Germany, Italy, Spain, Turkey and the UK. Remarkably, these six countries represent more than 70 percent of the value of acquired transactions in the whole of Europe, east and west.
The study notes the key role that e-commerce is already playing — and will increasingly play — in driving transaction volumes, particularly in developed countries. Acquirers with expertise in e-commerce will flourish while those focused on traditional payments sectors face lower growth and margin erosion.
Emphasis is also placed on the future of low value payments. At present this segment is relatively untapped from an acquiring point of view. Contactless cards have seemed like the obvious answer for some time, but take-up, particularly by merchants, has been painfully slow. This has opened up opportunities for alternatives, notably mobile solutions such as Google Wallet and new entrants such as Square and PayPal Here.
How the merchant acquiring sector will evolve is desperately difficult to predict. On the one hand, new entrants have shown themselves to be more nimble and responsive to consumer and merchant requirements; on the other, existing players have experience and scale, and are better positioned to address the increasing compliance and regulatory requirements.
We are nowhere near the end-game, so keep watching this space.