Merchant Acquirers, Are You Ready for an Increase in Volume?

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September 29, 2015

Three questions every CEO should ask themselves when preparing for a big increase in merchant processing volume.

Merchant Acquiring is fundamentally a volume business. Growth-minded CEOs are always asking “how can we get more merchant processing volume?” Well, be careful what you wish for. McKinsey Research has projected that total merchant electronic transaction volume is set to grow by about 7% every year for the next 5 years (Innovation and Disruption in U.S. Merchant Payments, May 2014). Will increased volume magnify currently minimal problems in your systems? Are you poised for the coming volume increase in overall transactions? In this article, we look at three questions you need to consider when taking on increased volume.


1). Will increased volume lower my margins?

If you look at the Merchant Acquirers with the highest volumes in the industry, they generally have the lowest margins as well. Why? Because as merchants begin to process exponentially more payments, they will inevitably need lower prices to keep costs down. Have you run an analysis of volume vs. margin and whether your business can sustain that attractive high-volume customer you’re targeting? Is your organization ready to handle large-volume clients? Small to mid-size organizations have been sunk before, taking on low margins with the hope that the increased volume will solve their revenue problems.


2). Are my systems ready for increased volume?

John Delaney, CEO of EVO Payments International was able to leverage a technological overhaul in order to land a big contract with the Bank of Ireland in 2014. As he knew that increased volume would lead to increased costs, he invested in automation in the areas of customer onboarding, customer reporting, and chargeback management. Critically, he didn’t play the chicken-and-egg game of waiting until a big client specifically requested more automated processes, he just went ahead and did it. Without robust and efficient systems, increased volume could expose previously unnoticed inefficiencies.


3). Would strategic partnerships position me for sustainable growth?

Consider the end-to-end process of the payments industry and your role in it. In your market and in your organization, where are you seeing weaknesses? Where might your strengths help someone else in a strategic partnership? Consider the partnership of Chase and Visa in forming Chase Paymentech. In closing the gap between the payment and the acquirer, Chase has positioned themselves for sustainable growth. But partnerships do not have to be limited to vertical alliances. If you are not currently prepared for a massive increase in volume, which processes could you outsource to another firm? Which core competencies would unnecessarily suffer with an increase in volume?



Increased volume is almost inevitable for your organization, but that growth will not necessarily translate to organizational health. Have you considered whether you are truly ready for the coming volume increase? Will you bite off more than you can chew by letting margins suffer? Are your systems nimble enough to offset increased volume with decreased costs? And have you considered whether a strategic partnership would set you up for success? These are all vital questions to ask when positioning your firm for long-term growth.