WE ARE USED TO thinking of automation as a beneficial tool that helps us cut costs, do things we couldn't do before, and add value to our products. Certainly this is all true, but automation does more than that. It is also a force that changes industry structure, revamping the basis of competition and helping determine which businesses banks should remain in and which they shouldn't.

Banking offers no clearer example of this than the credit card merchant acquiring business. Acquirers earn about $1 billion in revenue yearly by processing authorizations for merchants, capturing the data from the transactions, and handling the accounting, reporting, and chargeback functions. The market is the approximately 2.3 million merchants who did $250 billion in bank card charge volume in 1992.

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