Why the Acquirers are under severe pressure? - From Payment Source

Due to Digital Disruption, there are many good things happening. At the same time, acquires are facing many challenges.

They are under severe pressure from the digital payments revolution, challenged to hold onto clients by stitching together legacy systems, existing hardware, mobile, cloud and apps. Those that can harness innovation and find the right startup partners can not only stave off elimination, but drive the next generation of multi-channel shopping and transaction revenue."Acquirers have a much more important role in this business then they did 10 years ago," said Brian Riley, director of card services for Mercator Advisory Group. "In Europe they are forced down to be more efficient and in the U.S. they are forced to be more competitive, and that is reflected in the recent mergers we have seen."

The response from incumbent payment processors is to respond to the rise of software challengers like Stripe and Square by adding scale. Consolidation between bank technology sellers and merchant acquirers is the name of the game as
- FIS acquired Worldpay,
- Fisesrv bought First Data and
- Global Payments obtained TSYS.

"That type of activity is going to set the pace in acquiring for some time," Riley said.

The combined companies still have to differentiate themselves--it's not enough to just be larger since the fintech challengers often use the size of the legacy acquiring industry as a selling point, positioning themselves as smaller and more nimble. Expect the combined companies to seek third-party collaborations, especially to serve smaller businesses, to counter PayPal, iZettle, which PayPal acquired in 2018, and Square.

This is particularly true in Europe, where payments represent a more diverse mix, depending on the various payments schemes and local regulations in each country.

"Europe is a mix of highly innovative countries, such as Sweden, which is pushing for a cashless society, and rather traditional ones like Germany and France, who are proud of their local payment schemes both in offline and online commerce," said Martin Herlinghaus, market analyst for payments technology integrator AEVI, which completed recent research on acquiring challenges and trends in Europe.

Providing full service

The challenge for merchant acquirers is
- Serving customers who want flexibility with their payment networks,
- Numerous payment options and
- Add-on business services.
For example, travelers and small businesses want to support "own currency" payments in which consumers want to make payments abroad in their own currency and with their own device. This has been apparent in acquirers seeking ways to serve those merchants who want to accept a payment from customers using their national payment schemes or through mobile payments like Alipay