US payment consultancy First Annapolis has thrown
the spotlight on the growing importance of multinational merchants
to the acquiring industry. Analyst Josh Allen and managing partner
Marc Abbey give a brief overview of the largest players in the
industry.
If your view of the world is that over a
strategic time horizon, a small number of multinational acquirers
will generate massive scale through multinational merchants, than
the geographic patterns and tendencies of such merchants become
quite interesting.
Many national merchant markets tend to be highly
concentrated. For example the top ten retailers in France control
43 percent of retail sales; the top ten retailers in the UK control
35 percent; in Spain, 25 percent, in Germany 36 percent, etc
(interestingly, the US is much less concentrated). Therefore, it
has been possible for an acquirer to sign a small number of
merchants and generate a tremendous amount of scale with the
accompanying cost, product, and other benefits – this phenomenon
has been a dominant strategy theme in acquiring markets the world
over.
Under our best estimate, the top 250 retailers in
the world (not even considering the large travel and entertainment
merchants) control on the order of 15 percent to 20 percent of
global payment card volume, creating the tantalising prospect of a
multinational acquirer generating perhaps decisive scale globally
through the signing of just a relatively few merchants.
A few acquirers are obviously investing to
develop the capability to serve multinational merchants at least
regionally if not globally. These acquirers include RBS, Barclays,
First Data, Chase Paymentech, HSBC, and Elavon/Nova. There may be
others also pursuing a similar strategy, but the point is that it
is a small list compared to the hundreds of acquirers around the
world who compete on a domestic basis.
First Annapolis examined the largest 250
retailers globally, as identified in Deloitte’s “2007 Global Powers
of Retailing” study, and estimated their sales in the countries
around the world. On a regional level, these merchants’ sales are
overwhelmingly driven by the US and European regions, which
together account for nearly 80 percent of the sales of these
merchants.
Further, if acquirers expand outside of their
home markets by following their customers, then the international
sales of merchants headquartered in an acquirer’s home market are
highly relevant. The patterns happen to be different for the
American and European merchants. So for example, European
multinational merchants had an extremely strong European
orientation. Excluding a merchant’s sales in its home market, the
US was the only non-European country in the top five (ranked by
sales) for the merchants in our analysis headquartered in Europe.
By contrast, when we looked at sales volume outside of the US for
retailers in the top 250 which are headquartered in the US, the
highest volume region was Europe, but the top five countries
included a number of non-European markets and a strong north/south
axis.
