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ISOs will find the distribution of Visa's business interesting, ill find the distribution of Visa's business interesting,
ISOs w
because this is where ISOs live. There are about 7
because this is where ISOs live. There are about 7
million card-accepting merchants in the United States. I
million card-accepting merchants in the United States. I
estimate that the top 200 merchants generate about half
estimate that the top 200 merchants generate about half
of Visa card sales volume. At the bottom, there are perhaps
of Visa card sales volume. At the bottom, there are perhaps
6 million small merchants, who process a small share, less
6 million small merchants, who process a small share, less
than 10 percent of overall sales volume.
than 10 percent of overall sales volume.

O
States in 2019 is $13 trillion, and MasterCar
States in 2019 is $13 trillion, and MasterCard retains its d retains its Of course, these five firms do not employ all the bankcard f course, these five firms do not employ all the bankcard
salespeople; many smaller firms exist, too. By contrast, lespeople; many smaller firms exist, too. By contrast,
market s sa
market share of 10 percent, the company could generate hare of 10 percent, the company could generate
$1.27 trillion in gross development value (GDV) in the 1.27 trillion in gross development value (GDV) in the
$ V
Visa has a price/earnings ratio of 28.9 for 2012, an esti-isa has a price/earnings ratio of 28.9 for 2012, an esti-
mated 23.67 for 2013 and an estimated 20.2 for 2014.for 2013 and an estimated 20.2 for 2014.
U mated 23.67
United States. MasterCard charges an assessment fee of nited States. MasterCard charges an assessment fee of
0.098 percent of the GDV processed for a client. If it main-
0.098 percent of the GDV processed for a client. If it main-
New entrantsew entrants
tains this fee structure, it could generate over $1 billion in N
tains this fee structure, it could generate over $1 billion in
annual assessment fee revenues from the United States by
annual assessment fee revenues from the United States by For Visa and MasterCard to have gotten off the ground, or Visa and MasterCard to have gotten off the ground,
F
the end of the decade.
the end of the decade.
two t
two things had to happen: banks needed to get credit hings had to happen: banks needed to get credit
c
cards into consumers' hands and ISOs had to convince ards into consumers' hands and ISOs had to convince
It is unlikely these margins will be threatened by a price
It is unlikely these margins will be threatened by a price merchants to accept bankcards as a form of payment. chants to accept bankcards as a form of payment.
mer
war between the card brands; there seems to be a duopoly. T
war between the card brands; there seems to be a duopoly.
Thus, ISOs have always been in a symbiotic relationship hus, ISOs have always been in a symbiotic relationship
Also, the risk is very low that a new player will enter the wit
Also, the risk is very low that a new player will enter the
with Visa and MasterCard. h Visa and MasterCard.
market as a direct competitor, but I predict that a host of
market as a direct competitor, but I predict that a host of
new competitors will erode the brands' profitability in a
new competitors will erode the brands' profitability in a But w
But when you look at the profitability and multiple for hen you look at the profitability and multiple for
variety of ways.
variety of ways.
t these brands, you can understand why so many new play-hese brands, you can understand why so many new play-
e
Business distributioniness distribution
Bus ers want to get a piece of this. They will do it not by chal-rs want to get a piece of this. They will do it not by chal-
lenging V
lenging Visa directly (the large retailers will do that), but isa directly (the large retailers will do that), but
I ISOs will find the distribution of Visa's business interest-SOs will find the distribution of Visa's business interest- by
by offering new forms of money that are not interchange offering new forms of money that are not interchange
based – at least not at these levels. ased – at least not at these levels.
i
ing, because this is where ISOs live. There are about 7 ng, because this is where ISOs live. There are about 7 b
million card-accepting merchants in the United States. I d-accepting merchants in the United States. I
million car
estimate that the top 200 merchants generate about half of stimate that the top 200 merchants generate about half of
I
e I don't mean Bitcoin. I mean new ways and incentives for don't mean Bitcoin. I mean new ways and incentives for
Visa card sales volume. At the bottom, there are perhaps isa card sales volume. At the bottom, there are perhaps t the consumer to buy something. Visa and MasterCard are he consumer to buy something. Visa and MasterCard are
V
6 million small merchants, who process a small share, less chants, who process a small share, less p
6 million small mer
powerful brands, very powerful, but great brands have to owerful brands, very powerful, but great brands have to
t
than 10 percent of overall sales volume. han 10 percent of overall sales volume. r reinvent themselves at some point. It will be interesting to einvent themselves at some point. It will be interesting to
see if t
see if this happens, and how. If these changes come about, his happens, and how. If these changes come about,
(Keep in mind that there are another 15 to 20 million very how will you, as an ISO, be affected?
(Keep in mind that there are another 15 to 20 million very
how will you, as an ISO, be affected?
small merchants who don't take cards now).
small merchants who don't take cards now).
Since the beginning, ISOs have hitched their wagon to the
Since the beginning, ISOs have hitched their wagon to the
Perhaps another 40 percent is spread over a much greater
Perhaps another 40 percent is spread over a much greater Visa brand, and the Visa cost structure has in many cases
Visa brand, and the Visa cost structure has in many cases
number of larger merchants, sometimes called small to handsomely rewarded ISOs for signing merchants to take
handsomely rewarded ISOs for signing merchants to take
number of larger merchants, sometimes called small to
midsize enterprises (SMEs), probably less than 500,000
midsize enterprises (SMEs), probably less than 500,000 cards with the Visa brand.
cards with the Visa brand.
merchants. ISOs typically deal in the SME space and
merchants. ISOs typically deal in the SME space and
are somewhat marginalized when it comes to very large How will the new entrants create a revenue steam for ISOs
are somewhat marginalized when it comes to very large
How will the new entrants create a revenue steam for ISOs
enterprises, who can deal directly with Visa. It is question-
enterprises, who can deal directly with Visa. It is question- – or will they? That is the question.
– or will they? That is the question.
able whether it's worth it for an ISO to spend time chasing
able whether it's worth it for an ISO to spend time chasing
Brandes Elitch, Director of Partner
micro-merchants – that is to be determined. Brandes Elitch, Director of Partner Acquisition for CrossCheck Inc., Acquisition for CrossCheck Inc.,
micro-merchants – that is to be determined.
has been a cash management practitioner for several Fortune
has been a cash management practitioner for several Fortune
500 companies, sold cash management services for major banks
500 companies, sold cash management services for major banks
In terms of valuation, publicly traded companies in the
In terms of valuation, publicly traded companies in the
and served as a consultant to bankcard acquirers. A Certified
payments space, such as Heartland Payment Systems Inc.,
payments space, such as Heartland Payment Systems Inc., and served as a consultant to bankcard acquirers. A Certified
Cash Manager and Accredited ACH Professional, Brandes has a
Vantiv LLC, Total System Services Inc., WorldPay and
Vantiv LLC, Total System Services Inc., WorldPay and Cash Manager and Accredited ACH Professional, Brandes has a
Master's in Business Administration from New York University and
Global Payments Inc. seem to have an earnings before
Global Payments Inc. seem to have an earnings before Master's in Business Administration from New York University and
a Juris Doctor from Santa Clara University. He can be reached at
interest, taxes, depreciation and amortization multiple of
interest, taxes, depreciation and amortization multiple of a Juris Doctor from Santa Clara University. He can be reached at
brandese@cross-check.com.
between seven and 10.
between seven and 10. brandese@cross-check.com.
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