More Merchants Switching Acquirers

Since 2006, the percentage of merchants switching acquirers has surged, especially among mid-size retailers, according to a report from First Annapolis Consulting, a payments consultancy based in Linthicum, Md. Historically, smaller merchants have switched merchant acquirers more often than have large-volume merchants, and that tendency continues to hold, the report notes. What has changed since 2006, the last time First Annapolis studied merchant-attrition patterns, is that more large-volume merchants are shopping around. The merchant-attrition rate among merchants with $5 million to $10 million in annual card-processing volume increased from approximately 6% in 2006 to 12% in 2008 the report states. The report does not say which months are included in the 2008 analysis. But the largest attrition-rate increase occurred among mid-volume merchants. For example, about 20% of merchants with $500,000 to $1 million in volume switched acquirers in 2008 versus about 13% that did in 2006. Other mid-size merchant categories experienced similar attrition-rate increases, First Annapolis says. More competition among merchant acquirers for accounts, fewer overall accounts because of businesses failing, or a combination of both factors may be driving the shift, First Annapolis says. "This pattern will be noteworthy if it persists because most acquirers' sweet spot–where they generate the most economic value–[falls] within these size ranges," the report states.