Despite the overwhelming share the 10 largest acquirers have of the U.S. merchant-transaction business, smaller acquirers have enough room to develop their own niches, according to a recent Mercator Advisory Group Inc. annual report on the acquiring industry.
The top 10 acquirers processed about 87% of the dollar volume of U.S. merchant card transactions in 2009, about the same level as in 2008, Maynard, Mass.-based Mercator notes in the report released this week,
“It’s always been a top-heavy market with the largest players having the greater presence,” analyst and report author David Fish tells PaymentsSource. Fish does not anticipate the trend changing this year “We don’t expect it to subside,” he says.
Atlanta-based First Data Corp., including its multitude of partnerships, handles about 47% of the U.S. merchant transactions, Fish says.
The five largest acquirers have 75% of the market, Fish says. The leader is First Data, followed by Dallas-based Chase Paymentech LLC, Atlanta-based Elavon Inc., Cincinnati-based Fifth Third Processing Solutions LLC and Atlanta-based Global Payments Inc.
However, smaller companies still can operate a profitable business, Fish notes. “Big merchants produce a lot of the volume and are served by the biggest acquirers,” he says. “But there is a big market in small merchants. The small-merchant market … still needs card-payment services and can be extremely profitable.”
Consolidation also continues to play a major role in shaping the U.S. acquiring industry, Fish says.
The Royal Bank of Scotland Group PLC, for example, is in the process of selling RBS WorldPay, which in the U.S. is based in Atlanta, potentially altering the arrangements of the largest acquirers, Fish notes.
If, for example, Advent International Corp., joint-venture partner with Fifth Third Bancorp in Fifth Third Processing Solutions, wins the RBS WorldPay bid—Bain Capital LLC and Advent, both based in Boston, teamed up for the bid—it could combine the two acquirers, Fish speculates.
“If so, they’ll have great scale,” he says. “They’ll have a broader base of clients to sell valued-added services and products and more market power.”
