Digital Transactions - November 2014 - (Page 40)
November 2014 digitaltransactions
Should They Stay
Or Should They Go?
Non-bank acquirers are increasingly looking to foreign markets for
growth and profits. Some are thriving, but others would be better
advised to stay home.
he North American acquiring
market may have been more
challenging at one time or
another than it is these days, but if
so few independent sales organizations and other non-bank acquirers
can recall when. Merchant attrition
is up, margins are down, and transaction pricing seems to be all merchants
want to talk about.
ISOs can, and do, respond in a
number of ways. One way is to look
for new, presumably less competitive,
markets overseas. And, increasingly,
that's what they're doing.
"The idea is that the market here
is very competitive and very saturated," says Jason Oxman, chief executive of the Washington, D.C.-based
Electronic Transactions Association,
a trade group for ISOs and other
payments companies. "Merchants are
lucky the market is so competitive.
There are hundreds of ISOs."
Many national markets in Europe,
Asia, and Latin America, by contrast, are, or are perceived to be,
either virgin territory for acquiring
or dominated by single acquirers and
hence ripe for competitive challenge.
"Europe is the second-largest market
compared to the [United States], and
it's far from saturated," says former
Visa Inc. executive Linda Perry, executive consultant with San Mateo,
Calif.-based Global Vision Group, a
consultancy that organizes a London conference on overseas acquiring
opportunities. "That's why people are
Figuring out whether making
the move abroad is the right strategy, though, is a challenging affair,
bound up in complications like foreign operating costs and practices
and the question of whether domestic
profits have been mined as efficiently
as they could be.
'Crushed And Crowded'
To be sure, factors pushing acquirers abroad are powerful. One is the
rapid growth in e-commerce. Online
merchants in the U.S. increasingly
are selling to customers in foreign
markets, and are frustrated by crossborder interchange costs. Their foreign customers also want to buy with
their local currency and avoid foreignexchange fees, a hurdle that can hike
"In the early days of e-commerce,
the majority of e-commerce companies were U.S.-based. Then companies like Amazon went everywhere,"
* digitaltransactions * November 2014
Setting up shop in major foreign
markets can erase those problems. It's
an expensive move, but "if we don't
service those merchants, they'll seek
out those that will," says Doug Lewin,
executive vice president at Optimal
Payments PLC, which operates in
Europe, Canada, and the U.S.
Numbers on how many U.S. nonbank acquirers have already established operations overseas are hard
to come by. Even estimates are rudimentary, and are complicated by the
fact that not all those that venture
But those who watch this trend
say it's heating up. "It's expanding
far faster than ever in the past," says
Caroline Hometh, managing director at RocketPay Group, a Newburyport, Mass.-based firm that counsels
acquirers on foreign ventures. "There
is no conversation left where someone
says, 'Tell me why this is important.'
Now it's, 'I'm in Canada, how do
I get into Asia and how do I add
The London conference Perry
helps organize drew 135 attendees
from 22 countries last year, when
it was held for the first time. "We
had to add tables at the last minute.
It was crushed and crowded," she
says. The next one, set for May, may
attract 150, and that's only because
Perry wants to cap attendance to
allow delegates to mingle more
effectively. "Networking is a critical
Table of Contents for the Digital Edition of Digital Transactions - November 2014
The Gimlet Eye: Don't Write off POS Terminals Just Yet
Trends & Tactiics
Acquiring: POS Terminals Have a Future, And It's Looking Good
Strategies: Behind the Acquirers' M&A Spree
Cover Story: The 10 Most Pressing Issues in E-Payments
Acquiring: Should They Stay Or Should They Go?
Digital Currency: Here Come the Bitcoin ATMs
Endpoint: Why It's Different With Apple Pay
Digital Transactions - November 2014