Value- added services in Acquiring. Webinar 25 September 2015

Transcription

1 Value- added services in Acquiring Webinar 25 September 2015 Edgar, Dunn & Company, 2015

2 Acquirers are typically classified as either low cost provider or niche player Low Cost provider Niche market player Key elements: Transaction based product Development of acceptance propositions in developing and under- developed markets Development of co- ordinated and integrated acquisition propositions that encompass new payment types and new merchant types Scale economies in processing and settlement of all transactions Key elements: Provision of value- added services Focus on broader merchant needs and value management Joint planning with key accounts re major POS changes and international expansion Transaction acquiring services as part of broader segmented merchant propositions Confidential 2

3 Value- added services are not just relevant for the niche player Cost per transaction Source: EDC analysis Scale economies Number of transactions Scale economies in acquiring work and do exist BUT, acquirers cannot expect to benefit from ever falling processing costs There is a bottom level of processing costs which will impact an acquirer s ability to reduce prices further while still making a positive profit contribution Even scale acquirers need to provide some value- added services Confidential 3

4 A more historic view on value- added services Increasing Commoditisation Packages for broader needs of specific merchant segments Enhanced card acceptance services (e.g., multi- channel, DCC, advanced risk mgmt) Increasing Merchant Relationship Management Basic card acceptance services: low- cost simple, transactional services for all cards Confidential 4

5 There are some core value- added services that need to be offered irrespective of merchant size, sales channel, etc. Value- added services framework Core Offering to all merchants Commodity Value- Added Services* Large merchant needs Cost- efficient transaction processing SME merchant needs * Such as dispute management, on- boarding, DCC etc. Confidential 5

6 Core VAS Example 1 Dynamic Currency Conversion Source: Touchstone / EDC analysis When supporting international merchants or T&E merchants, being able to offer a DCC solution is a competitive necessity BUT, there is not a lot of growth in the DCC space; those merchants that require DCC appear to have it already Confidential 6

7 Core VAS Example 2 Merchant portal Merchants want access to real- time data More autonomy Ease to monitor information Improve processes / reduce costs Acquirers improve quality of service Increased customer satisfaction Process improvement / overhead reduction Data analytics Sell to merchants Sell to other parties? Compliance with MIF regulation Confidential 7

8 Case Study Big data by BBVA Innovations Confidential Source: 8

9 In addition to the core offering, the provision of value- added services needs to consider merchant type and merchant size Value- added services framework Core Offering to all merchants Commodity Value- Added Services* Large merchant needs Terminals Multi- Channel Customised solutions Cost- efficient transaction processing SME merchant needs * Such as dispute management, on- boarding, DCC etc. Confidential 9

10 Case Study Value- added services Large/Pan- European merchant Cross- market requirements Company Background: Luxury retailer Over 100 store locations across 16 European markets European sales: over 1.2bn Global sales: ~ 20bn 21 separate merchant acquiring contracts Different POS contracts Objective: Centralise the contractual arrangements for acquirers and reduce MSC expenses Requirements: Single contract for all 16 markets managed centrally for all card types (credit card, domestic debit) Standardised POS terminal for all stores with the ability to integrate into central cash management systems Store level reporting and reconciliation with SAP Confidential 10

11 Unlike larger merchants, SMEs aren t always clear as to what type of value- added service they want or need Value- added services framework Core Offering to all merchants Commodity Value- Added Services* Large merchant needs Terminals Multi- Channel Customised solutions Cost- efficient transaction processing SME merchant needs? * Such as dispute management, on- boarding, DCC etc. Confidential 11

12 The need for value- added services amongst SMEs is frequently driven by the lack of funds for customised solutions In most instances, SMEs do not know what other services they need from their acquirer Acquirers need to be proactive and focus their sales pitch on opportunity to sell more Selected services that could be of interest: Loyalty Installments at POS E- invoicing in POS Confidential 12

13 Many value- added services require terminal access and many acquirers are not having direct access to that part of infrastructure Terminal provision is a service that many acquirers don t provide (anymore) Partnerships with terminal providers are important but can be complex Non- priority implementation Long lead times Who determines road- map? Costs to be borne by acquirer? But if partnership is working and successful, there are opportunities to Bundle services Different pricing structure application licensing fee rather than hardware lease or rental Confidential 13

14 Key take- aways Value- added services are not just relevant to niche segment acquirers There is no one- size- fits- all approach when providing those services Be aware that very often some development and integration work needs to be done on the terminal Confidential 14

15 For follow- ups feel free to contact Volker Schloenvoigt Director Edgar, Dunn & Company Candlewick House 120 Cannon Street London EC4N 6AS Tel Mobile Fax

16 Any questions? Don t forget to use the chat pane on the right hand side to send in any questions and select send to All Panelists Confidential 16

17 Don t miss our upcoming Webinars! OCTOBER 29 Thursday NOVEMBER 26 Thursday DECEMBER - Open API Banking NEXO To sign up: Go to: or Send an e- mail to: shanta.paratian@edgardunn.com First Floor, Candlewick House 120 Cannon Street London, EC4N 6AS United Kingdom Shanta Paratian Consultant Tel +44 (0) Mobile +44 (0) Fax +44 (0) shanta.paratian@edgardunn.com Confidential 17