Merchants Cite “Don’t Know” as the Most Common Acquirer Name: Survey

Ideally, merchants that use payment card acceptance services would know which merchant acquirers they work with. But in a recent report from research firm Aite Group LLC, the most common response when merchants were asked to name their acquirers was “Don’t know.”

Of the 491 U.S. merchants surveyed for the “Meeting Merchant Needs in a Commoditized Acquiring Market: Innovate, Segment and Bundle” report, 25% said they didn’t know the name of their merchant acquirer. The next largest response was First Data Corp. at 16%.

Many acquiring executives long have said they sell a commodity, says Rick Oglesby, senior analyst at Boston-based Aite and author of the report. “I wanted to test that with merchants,” Oglesby says. The conclusion? “Generally, they do.”

In addition to a large number of respondents not knowing the name of their merchant acquirer, 36% of respondents said they would change their merchant acquirer for one with a lower price. Considering price as a factor, too, cements the commoditization label for Oglesby. “No other consideration is even close in motivating merchant migration to a new acquirer,” Oglesby writes in the report, “clearly indicating that merchants simply do not perceive significant differentiation between acquiring organizations.”

Oglesby says the challenge, then, is to develop a strategy. “It is a commoditized market, but that doesn’t mean you have to sell commoditized products,” Oglesby tells Digital Transactions News.

In the report, Oglesby provides three strategies that merchant acquirers could use: innovate, bundle and segment. Innovation is creating new products or modifying existing ones that force competitors to keep up, he says, such as PayPal Inc. moving from e-commerce to brick-and-mortar and mobile payments. Bundling is selling commoditized products alongside related ones, such as selling merchant services as a tie-in to accounting software, as Intuit Inc. does. Segmenting a market is the strategy of focusing on a narrow group of customers, to find those less price sensitive, he says. Mercury Payment Systems, an acquirer that sells just to point-of-sale software developers and POS system resellers, is one example of an acquirer using segmenting to its benefit.

Acquirers can use these three strategies in conjunction with one another, and with other strategies, Oglesby says. He has one caveat, however, and that is to avoid perpetuating the commoditization. “It’s important that acquirers look at their strategies, and if they’re going to bundle, they need to look at differentiation within their bundles,” he says. Many times, in attempts to distinguish their products from competitors, acquirers will use similar types of value-added products, he says.

It is because of commoditization that acquirers have many opportunities to differentiate themselves, Oglesby notes. “Acquirers should target specific merchant segments and bundle value-added services that meet the needs of that segment,” he writes. “In so doing, they can generate above-average growth and below-average attrition while reducing the influence of price competition.”