Revenue Per Merchant Varies Greatly for Mid-Tier Merchant Acquirers, Report Shows

Top performing merchant acquirers make more than 103 basis points per transaction from merchants that process with them. That’s the finding from a survey of 37 independent sales organizations and acquirers conducted by Adil Consulting, an Omaha, Neb.-based payments-advisory firm. The median is 64 basis points.

The top 20% of merchant acquirers received between 103 and 128 basis points in revenue per transaction, while the bottom 20% received a much lower fee, between 22 and 32 basis points. The bulk—60%—earn from 32 to 103 basis points. A basis point, in this context, is one-hundredth of a percentage point on processing volume.

The top performers tend to share four characteristics, says Adil Moussa, principal of the firm. They specialize in market verticals, which enables them to burrow themselves into an industry and get to know it, he says. A market vertical might be restaurants, for example, or professional offices.

Second, they offer more than payments products, Moussa says, while remaining relevant to the merchant’s needs. These other services, such as payroll or inventory management, may have higher profit margins or a revenue cycle dissimilar to the merchant’s transaction flow.

Other characteristics are a low cost of acquisition, which often means a sales force that relies less on smaller ISOs or agents demanding a high revenue share, and joint ventures that tap into the expertise of other companies.

But, the majority of acquirers may be in a hunt to position themselves, Moussa says. “The ones in the middle are just doing OK,” he says. Even without a vertical specialization, they try to find ways to position themselves. But doing so will require adopting a specialization approach to merchants, Moussa says.

Of the four, specialization is the cornerstone, Moussa says. “That’s a trend that hopefully should be picking up,” he says.