2015-09-01-Bain-Five_Imperatives_for_Navigating_Turbulence_in_the_Payments_Ecosystem_12页_1mb

FIVE imperatives for navigating turbulence in the payments ecosystem
Merchant acquirers must evolve from financial utilities to technology partners to avoid falling into low-margin commodity activities. New entrants are disrupting the market, requiring established acquirers to adapt quickly to retain relevance and maximize profits in an increasingly competitive landscape.

Key Imperatives:

1. Retain Control of the Merchant-Consumer Payment Interface: Acquirers must control the payment interface and merchant relationship by leveraging flexible technology, overcoming price-based competition, especially with large domestic merchants who shifted to integrated solutions years ago.

2. Develop Segment-Specific Propositions: Offering tailored services for large domestic merchants, SMEs, and global online merchants is crucial. Global online merchants and SMEs offer richer revenue pools due to complex needs and diverse payment methods, while large domestic corporations have historically generated low margins.

3. Protect Distribution Channels and Access to New Channels: Strengthening distribution to small businesses, such as through partnerships with ISVs, VARs, and developers, is key. Acquirers should leverage their existing relationships and invest in direct sales capabilities, ensuring higher productivity and market reach across both physical and digital channels.

4. Embrace New Payment Types: Acquirers should remain neutral and innovative regarding payment methods beyond cards, including mobile wallets, cryptocurrencies, and real-time account-to-account payments. Embracing non-card methods and offering a wide range of payment options supports diverse merchant needs and consumer preferences in a rapidly evolving ecosystem.

5. Defend and Monetize Data: Payments data is a valuable asset. By solving data ownership issues and developing data-based propositions (e.g., targeted offers, cost reduction analytics, decision-making tools), acquirers can enhance customer retention and capture new streams of value. However, many acquirers lack the analytical expertise or investment to unlock this potential effectively.

Additionally, significant industry shifts such as the rise of mobile wallets, tokenization, and regulatory changes (e.g., PSD2) are reshaping the payments landscape. The move from managing just payment processing to providing end-to-end integrated solutions signals a fundamental change in the acquirer’s role.

Merchant Acquiring: Business Fundamentals

• Value Chain: Transaction capture (terminals, gateways) and pure acquiring (routing transactions for authorization and settlement) define the core, with ancillary services like tokenization, fraud management, and more.
• Economic Model: Profits depend on revenue yields, which are higher for global online merchants and SMEs than for large domestic corporations. Acquirers must offer more than just transaction processing to maintain value, especially amidst fintech competition.

To succeed, acquirers must transform their business model to prioritize innovation, customer-centricity, and data leveraging. This transition requires organizational and cultural shifts to maintain competitiveness in the dynamic payments ecosystem.