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Report tells acquirers port tells acquirers h
Re
highly differentiated options, Oglesby added. The result ighly differentiated options, Oglesby added. The result
is that product-driven solution providers are on the rise, s that product-driven solution providers are on the rise,
i
to the detriment of traditional acquirers. Oglesby warned
how to stay in the game to the detriment of traditional acquirers. Oglesby warned
how to stay in the game
that acquirers who do not recognize this dynamic and fail
that acquirers who do not recognize this dynamic and fail
to take action "are likely to end up either out of business or
to take action "are likely to end up either out of business or
swallowed up by larger players."
swallowed up by larger players."
I acquir Key challengesy challenges
t is no surprise that pressures on the traditional prise that pressures on the traditional
t is no sur
Ke
acquirer business model have caused major disrup-er business model have caused major disrup-
tion in the payments industry. From complex regula-he payments industry. From complex regula-
tion in t
Aite's research, based on interviews conducted with 26 esearch, based on interviews conducted with 26
Aite's r
I tory intervention to upstart technology firms eating tory intervention to upstart technology firms eating
e
awa
away at acquirers' margins, the list of industry disruptors y at acquirers' margins, the list of industry disruptors executives from 22 U.S. merchant acquirers, concluded that xecutives from 22 U.S. merchant acquirers, concluded that
t
i is long. A new impact note from Aite Group LLC throws s long. A new impact note from Aite Group LLC throws the key challenges faced by traditional acquirers involves he key challenges faced by traditional acquirers involves
margin compression, business transformation and regulation. gin compression, business transformation and regulation.
i into sharp relief the extent of those pressures and conveys nto sharp relief the extent of those pressures and conveys mar
t the dire warning that acquirers remaining on the path of he dire warning that acquirers remaining on the path of
Oglesby called margin compression a "vicious cycle" of glesby called margin compression a "vicious cycle" of
standard POS terminals and price differentiation strategies d POS terminals and price differentiation strategies O
standar
ar i increased competition, consolidation and emerging technology ncreased competition, consolidation and emerging technology
are destined for extinction.e destined for extinction.
players that work in concert to erode revenue. Revenue needed
players that work in concert to erode revenue. Revenue needed
to invest in new technologies to combat margin compression is
to invest in new technologies to combat margin compression is
I
In Transform, Consolidate, or Die: U.S. Acquirers on an n Transform, Consolidate, or Die: U.S. Acquirers on an
thus in shorter supply. Oglesby characterized that downward
Unsustainable Path, Aite Senior Analyst Rick Oglesby said
Unsustainable Path, Aite Senior Analyst Rick Oglesby said thus in shorter supply. Oglesby characterized that downward
spiral as the "path to oblivion" for acquirers.
the traditional merchant acquiring business has become spiral as the "path to oblivion" for acquirers.
the traditional merchant acquiring business has become
commoditized, with players no longer able to differentiate
commoditized, with players no longer able to differentiate
Oglesby said acquirers recognize they need to change but
themselves. "If a payment terminal is analogous to a
themselves. "If a payment terminal is analogous to a Oglesby said acquirers recognize they need to change but
are uncertain of which path to take. The competitor most on
telephone, acquirers have increasingly become the dial are uncertain of which path to take. The competitor most on
telephone, acquirers have increasingly become the dial
the minds of the research respondents is Square. Acquirers
tone, comparable to a wired telephone company that lacks
tone, comparable to a wired telephone company that lacks the minds of the research respondents is Square. Acquirers
both admire the firm for its innovation and are concerned
significant differentiation from competitors," he wrote. both admire the firm for its innovation and are concerned
significant differentiation from competitors," he wrote.
about the threat it poses to them. Oglesby quoted one
In comparison, newer, technology-focused firms, such as
In comparison, newer, technology-focused firms, such as about the threat it poses to them. Oglesby quoted one
acquirer as saying, "Square is pulling the industry along,"
Square Inc. and PayPal Inc., have innovated with cloud- acquirer as saying, "Square is pulling the industry along,"
Square Inc. and PayPal Inc., have innovated with cloud-
by disrupting the marketplace with innovative mobile
and smartphone-based schemes that offer merchants by disrupting the marketplace with innovative mobile
and smartphone-based schemes that offer merchants
payment solutions and causing acquirers to play catch up.
payment solutions and causing acquirers to play catch up.
According to Aite, most acquirers report that the debit
According to Aite, most acquirers report that the debit
card interchange cap imposed on the industry by the
card interchange cap imposed on the industry by the
Durbin Amendment to the 2010 Dodd-Frank Act has
Durbin Amendment to the 2010 Dodd-Frank Act has
increased profits for them. However, they don't believe
increased profits for them. However, they don't believe
future regulation will do the same. "Rather, they expect a
future regulation will do the same. "Rather, they expect a
continued back-and-forth process between the card brands
continued back-and-forth process between the card brands
and regulatory bodies, and they expect to be caught in the
and regulatory bodies, and they expect to be caught in the
middle," Oglesby said.
middle," Oglesby said.
Extinction avoi
Extinction avoidance strategydance strategy
Aite's r
Aite's research noted that acquirers are focused primarily esearch noted that acquirers are focused primarily
on expanding product offerings to combat these downward g product offerings to combat these downward
on expandin
p
pressures and avoid extinction. Solutions being developed ressures and avoid extinction. Solutions being developed
i include:nclude:
• • HelpingHelping merchantsmerchants complycomply withwith evolvingevolving
g
government regulations and card brand mandatesovernment regulations and card brand mandates
•
• Integrating solutions to support mobile-based Integrating solutions to support mobile-based
l
loyalty applicationsoyalty applications
• Seeking ways to share in advertising revenue via Seeking ways to share in advertising revenue via
•
marketing and payment solutionsketing and payment solutions
mar
Oglesby said the industry must undertake a "technological
Oglesby said the industry must undertake a "technological
renovation." But even as acquirers navigate this difficult
renovation." But even as acquirers navigate this difficult
process of reinvention, they must be aware that technological
process of reinvention, they must be aware that technological
transformation is merely "the first step and that it may be
transformation is merely "the first step and that it may be
the least significant one," he said.
the least significant one," he said.
100
1
Newss
Report tells acquirers port tells acquirers h
Re
highly differentiated options, Oglesby added. The result ighly differentiated options, Oglesby added. The result
is that product-driven solution providers are on the rise, s that product-driven solution providers are on the rise,
i
to the detriment of traditional acquirers. Oglesby warned
how to stay in the game to the detriment of traditional acquirers. Oglesby warned
how to stay in the game
that acquirers who do not recognize this dynamic and fail
that acquirers who do not recognize this dynamic and fail
to take action "are likely to end up either out of business or
to take action "are likely to end up either out of business or
swallowed up by larger players."
swallowed up by larger players."
I acquir Key challengesy challenges
t is no surprise that pressures on the traditional prise that pressures on the traditional
t is no sur
Ke
acquirer business model have caused major disrup-er business model have caused major disrup-
tion in the payments industry. From complex regula-he payments industry. From complex regula-
tion in t
Aite's research, based on interviews conducted with 26 esearch, based on interviews conducted with 26
Aite's r
I tory intervention to upstart technology firms eating tory intervention to upstart technology firms eating
e
awa
away at acquirers' margins, the list of industry disruptors y at acquirers' margins, the list of industry disruptors executives from 22 U.S. merchant acquirers, concluded that xecutives from 22 U.S. merchant acquirers, concluded that
t
i is long. A new impact note from Aite Group LLC throws s long. A new impact note from Aite Group LLC throws the key challenges faced by traditional acquirers involves he key challenges faced by traditional acquirers involves
margin compression, business transformation and regulation. gin compression, business transformation and regulation.
i into sharp relief the extent of those pressures and conveys nto sharp relief the extent of those pressures and conveys mar
t the dire warning that acquirers remaining on the path of he dire warning that acquirers remaining on the path of
Oglesby called margin compression a "vicious cycle" of glesby called margin compression a "vicious cycle" of
standard POS terminals and price differentiation strategies d POS terminals and price differentiation strategies O
standar
ar i increased competition, consolidation and emerging technology ncreased competition, consolidation and emerging technology
are destined for extinction.e destined for extinction.
players that work in concert to erode revenue. Revenue needed
players that work in concert to erode revenue. Revenue needed
to invest in new technologies to combat margin compression is
to invest in new technologies to combat margin compression is
I
In Transform, Consolidate, or Die: U.S. Acquirers on an n Transform, Consolidate, or Die: U.S. Acquirers on an
thus in shorter supply. Oglesby characterized that downward
Unsustainable Path, Aite Senior Analyst Rick Oglesby said
Unsustainable Path, Aite Senior Analyst Rick Oglesby said thus in shorter supply. Oglesby characterized that downward
spiral as the "path to oblivion" for acquirers.
the traditional merchant acquiring business has become spiral as the "path to oblivion" for acquirers.
the traditional merchant acquiring business has become
commoditized, with players no longer able to differentiate
commoditized, with players no longer able to differentiate
Oglesby said acquirers recognize they need to change but
themselves. "If a payment terminal is analogous to a
themselves. "If a payment terminal is analogous to a Oglesby said acquirers recognize they need to change but
are uncertain of which path to take. The competitor most on
telephone, acquirers have increasingly become the dial are uncertain of which path to take. The competitor most on
telephone, acquirers have increasingly become the dial
the minds of the research respondents is Square. Acquirers
tone, comparable to a wired telephone company that lacks
tone, comparable to a wired telephone company that lacks the minds of the research respondents is Square. Acquirers
both admire the firm for its innovation and are concerned
significant differentiation from competitors," he wrote. both admire the firm for its innovation and are concerned
significant differentiation from competitors," he wrote.
about the threat it poses to them. Oglesby quoted one
In comparison, newer, technology-focused firms, such as
In comparison, newer, technology-focused firms, such as about the threat it poses to them. Oglesby quoted one
acquirer as saying, "Square is pulling the industry along,"
Square Inc. and PayPal Inc., have innovated with cloud- acquirer as saying, "Square is pulling the industry along,"
Square Inc. and PayPal Inc., have innovated with cloud-
by disrupting the marketplace with innovative mobile
and smartphone-based schemes that offer merchants by disrupting the marketplace with innovative mobile
and smartphone-based schemes that offer merchants
payment solutions and causing acquirers to play catch up.
payment solutions and causing acquirers to play catch up.
According to Aite, most acquirers report that the debit
According to Aite, most acquirers report that the debit
card interchange cap imposed on the industry by the
card interchange cap imposed on the industry by the
Durbin Amendment to the 2010 Dodd-Frank Act has
Durbin Amendment to the 2010 Dodd-Frank Act has
increased profits for them. However, they don't believe
increased profits for them. However, they don't believe
future regulation will do the same. "Rather, they expect a
future regulation will do the same. "Rather, they expect a
continued back-and-forth process between the card brands
continued back-and-forth process between the card brands
and regulatory bodies, and they expect to be caught in the
and regulatory bodies, and they expect to be caught in the
middle," Oglesby said.
middle," Oglesby said.
Extinction avoi
Extinction avoidance strategydance strategy
Aite's r
Aite's research noted that acquirers are focused primarily esearch noted that acquirers are focused primarily
on expanding product offerings to combat these downward g product offerings to combat these downward
on expandin
p
pressures and avoid extinction. Solutions being developed ressures and avoid extinction. Solutions being developed
i include:nclude:
• • HelpingHelping merchantsmerchants complycomply withwith evolvingevolving
g
government regulations and card brand mandatesovernment regulations and card brand mandates
•
• Integrating solutions to support mobile-based Integrating solutions to support mobile-based
l
loyalty applicationsoyalty applications
• Seeking ways to share in advertising revenue via Seeking ways to share in advertising revenue via
•
marketing and payment solutionsketing and payment solutions
mar
Oglesby said the industry must undertake a "technological
Oglesby said the industry must undertake a "technological
renovation." But even as acquirers navigate this difficult
renovation." But even as acquirers navigate this difficult
process of reinvention, they must be aware that technological
process of reinvention, they must be aware that technological
transformation is merely "the first step and that it may be
transformation is merely "the first step and that it may be
the least significant one," he said.
the least significant one," he said.
100
1
