The Top-Heavy Acquiring Industry

Consulting firm The Strawhecker Group is out with its 2016 rankings of U.S. merchant acquirers, and they show that 240 acquirers and independent sales organizations processed more than $5 trillion in payment volume. The 10 biggest acquirers accounted for 80% of that volume.

Topping the list is JPMorgan Chase & Co.’s Chase Commerce Solutions, which posted $1 trillion in U.S. volume last year. Next was First Data Corp.’s direct acquiring business, with $770 billion.

The next eight, in order, were: Bank of America Merchant Services, Vantiv Inc., U.S. Bancorp’s Elavon subsidiary, Wells Fargo Merchant Services, Global Payments Inc. (excluding its Heartland Payment Systems and OpenEdge units), Citigroup Inc.’s Citi Merchant Services, Heartland, and TSYS Merchant Solutions/TransFirst.

First Data, however, is the clear leader when all of its sprawling acquiring businesses, including joint ventures with some of the nation’s biggest banks, are added together. The Atlanta-based firm processes for BofA, Wells Fargo, Citi, SunTrust, PNC, and through them, scores of ISOs, many of them billion-dollar-plus entities in themselves. Combined, those five bank partnerships alone generated $1.31 trillion in volume last year, putting First Data’s estimated total volume at more than $2 trillion.

“Having those bank partners is critical to acquiring large enterprise merchants,” says Jared Drieling, director of business intelligence at TSG.

Similarly, Atlanta-based Global Payments processed $350 billion when Heartland and OpenEdge, the latter of which serves value-added resellers and independent software vendors, are included. OpenEdge processed $20 billion in volume last year, according to Omaha, Neb.-based TSG.

TSG derived its data from a survey sent to acquirers and its own estimates, according to Drieling. More than half the surveyed companies responded, he says.

The transaction leader was Vantiv, which has a large PIN-debit processing business, with an estimated 21 billion transactions. TSG estimates that San Francisco-based Square Inc. has more merchant locations than any other acquirer, with 2.5 million. Square’s original proposition beginning in 2009 was signing part-time sellers and micro businesses.

The acquiring industry continued its longstanding consolidation trend over the past year, with Symmes Township, Ohio-based Vantiv buying the U.S. unit of Canada’s Moneris Solutions in December for $406.8 million in cash. Global Payments bought Heartland in June, and Total System Services Inc. (TSYS) bought TransFirst in April.

“I think that M&A activity will remain healthy and we’ll likely see more strategic smaller, technology-focused acquisitions,” says Drieling.

Indeed, processors increasingly are trying to differentiate themselves by the technology they offer merchants, not just a low discount rate, according to Drieling. He points to First Data’s strong push to distribute its Clover line of devices, and there are many others, including Square with its proprietary mobile and point-of-sale technology.

“In 2017, we’ll witness more and more acquirers and other payment entities define themselves as technology providers, either in reality or through marketing, to showcase that they are an ideal payment partner for the changing merchant environment who can provide that seamless, efficient payment platform, any time and anywhere for consumers,” says Drieling.

Other acquirers, notably Vantiv and Global Payments, have put considerable resources into distinct sales channels, such as offering payment services through ISVs and VARs that provide business-management software applications to merchants.

Still others, including Elavon, which has many travel-industry merchants, as well as Global Payments, go after industry verticals. Global Payments’ Heartland unit has a large portfolio of restaurant merchants.

“By specializing, the acquirer is able to provide more value to their merchant clients through understanding the individualized needs of an industry,” says Drieling.

—Jim Daly