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Merchant acquiring in the age of Digital Commerce, Credorax

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Merchant Acquiting in the age of Digital Commerce, by samantha jacobs.

Published in: Economy & Finance

Merchant acquiring in the age of Digital Commerce, Credorax

  1. 1. MerchantAcquiring in the age of DigitalCommerce
  2. 2. 2/26/2017 Copyright 2016. All rights reserved. 2 Global e-Commerce is Going thru the Roof! E-commerce $1.316 trillion worldwide 2014 China & USA are leaders 55% of global Internet retail sales
  3. 3. 2/26/2017 Copyright 2016. All rights reserved. 3 … Providing Boundless Opportunities Cross-border e-Commerce sales reached $300 billion 25% is global cross border e-commerce Growing in excess of 45% YoY US, UK and China are the most attractive e-commerce cross-border destinations
  4. 4. Globalization of e-commerce presents a MASSIVE revenue opportunity for EVERYONE who can give MERCHANTS quick access to INTERNATIONAL markets So … How can PSPs maximize this opportunity … despite PRESSURES from every direction? 2/26/2017 Copyright 2016. All rights reserved. 4 Globalization and the PSP
  5. 5. Merchants want it all. Now. 2/26/2017 Copyright 2016. All rights reserved. 5 Payment Service Provider Increasing Merchant Demand PSPs must provide merchants with innovation: • Quality: reliable, secure platform; high conversion rates • Cost: least-cost-routing, domestic processing, transparent pricing • Sources: cross-channel devices • Markets: domestic, intra regional and inter regional • Knowledge: regional, compliance & legislation • Tools: billing, accounting, logistics, reconciliation, BI
  6. 6. 2/26/2017 Copyright 2016. All rights reserved. 6 Back-Office is a Nightmare… PSPs are expected to handle… • Multiple Integrations • Reporting • Settlement • Reconciliation • Multiple Legacy Platforms • Fraud Services • Customer Service
  7. 7. Complex Reality of Going Global 2/26/2017 Copyright 2016. All rights reserved. 7 30 CountriesPSP 50 Acquirer Contracts 50 Backend Integrations 35 Front-end Integrations 20 Types of Hardware
  8. 8. Front End (authorisation) Integration Support and account management Reporting harmonisation On-boarding and KYC cost Back Office (funding and settlement) integration 45-150K per acquirer 6-10 weeks 30-40K per acquirer per year 20-100K per acquirer per year 2-15K per retailer per acquirer 30-60 days 350-500K per acquirer 6-12 months HIGH Up-Front Costs Multiple Acquirer Integrations 2/26/2017 Copyright 2016. All rights reserved. 15 Source: Consult Hyperion 2015
  9. 9. New Entrants Flooding the Market 2/26/2017 Copyright 2016. All rights reserved. 9 POS Terminals Billing Accounting e-Com Solution Providers Banks Card Schemes Logistics PSP Payment Service Provider
  10. 10. PSPs Deliver Revenue & EBITDA Growth… 2/26/2017 Copyright 2016. All rights reserved. 10 Source: Innovalue, Payments universe historical operational metrics as of April 15th 2014 0% 10% 20% 30% 40% 50% 60% 70% Revenue Growth CY12-13 EBITDA margin CY12 EBITDA margin CY13 9.8% 10.0% 22.1% 10.1% 11.4% 19.2% 28.9% 9. 6% 32.1% 60.0% 4.2% 20.8% 28.0% 18. 6% 30.0% 61.5% Acceptance Processing PSP/ Online Payments Issuing / Prepaid Schemes
  11. 11. 3 2 … but PSPs are Facing Dilemmas How to Maintain & Expand Profitability when competition is heating up? How to go Global Quickly & Cost-Effectively? How to respond to Merchant Demands without going broke? 2/26/2017 Copyright 2016. All rights reserved. 11 1
  12. 12. Traditional Banks Less Relevant … New entrants and smaller merchant acquirers steal merchants away from traditional bank acquirers If a traditional acquirer can't deliver, PSPs will quickly find an acquirer that can. Simple as that. 2/26/2017 Copyright 2016. All rights reserved. 12 Source: ETA, Goldman Sachs Global Investment Research 2015 23% 23% 18% 18% 13% 5% New entrant Smaller merchant acquirer iPOS distributor or re-seller Larger merchant acquirer Similar size merchant acquirer Other
  13. 13. … as they Begin Outsourcing Acquiring Services 2/26/2017 Copyright 2016. All rights reserved. 13 • Top 40 European traditional banks that provided inhouse acquiring shrank from 71% to 58% • Acquiring is non-core: aim to offer the service, but not to be the actual provider • Not interested in investment in product and platform capabilities • Europe’s leading traditional banks switch their customers to external partners that provide acquiring services PSPs are moving away from traditional banks, towards partners whose core business is merchant acquiring Source: Innovalue 2015 71% 21% 8% 58% 11% 32% 73% 13% 14% 55% 12% 33% 2010 2015 By Number Of Banks By Total Assets In-house Partnering Referral
  14. 14. I may not have the answer, but I’ll find it, I may not have the time, but I’ll make it. 2/26/2017 Copyright 2015. All rights reserved. 3 Client Advocacy
  15. 15. Thank You 2/26/2017 Copyright 2016. All rights reserved. 15

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