As the digital payments landscape evolves, businesses that service and support merchant payments are increasingly exploring the role of becoming their own merchant acquirer.

Understanding the intricacies of becoming a merchant acquirer, the benefits it offers, and the process involved, can significantly impact a company’s strategic roadmap. This article seeks to provide a guide for merchant Payment Facilitators (PayFacs) and those that act as intermediaries like Independent Sales Organisations (ISOs) on why you’d want to take the leap and become your own merchant acquirer.

Understanding the Role of Merchant Acquirers

The role of a Merchant Acquirer is a simple yet crucial one. They allow merchants to accept credit and debit card transactions, providing merchants with greater options for customer payment methods. They not only process the transactions but manage the relationship with the card schemes (such as Visa and Mastercard) as well.

Yet, firms sourcing a third-party merchant acquirer may gain the ability to accept card payments, but for PayFacs and ISOs, it is often the case that they are left “out of the loop” when it comes to card scheme activities.

Why Become a Merchant Acquirer?

Becoming a merchant acquirer presents substantial growth opportunities and increased revenue from merchant service charges. Additionally offering additional customised value-added services can also help develop a firm and allow it to stand out from its competition.

Becoming a merchant acquirer also presents a great opportunity for independence. Those that step away from using third-party providers can develop their own presence and relationship with the card scheme networks.

According to the Payment Systems Regulator (PSR) report, “Market review into card-acquiring services” (published in 2021), addressing common merchant concerns like complex pricing and high switching costs can attract a significant customer base.

Regulatory support enhances these opportunities by promoting competition and lowering entry barriers, fostering a favourable environment for new acquirers to innovate and gain market share.

Furthermore, new acquirers can differentiate themselves by improving merchant experiences. Not only with competitive pricing due to reduced third-party costs, but with enhanced services such as data analytics, fraud prevention and an inhouse level of customer support and account management.

This not only helps new acquirers build a loyal customer base, increases company valuation, but also contributes to a more competitive and innovative market that benefits both merchants and consumers.

Let’s explore the benefits of being a merchant acquirer in more detail below:

Revenue Generation: Merchant acquirers earn revenue through various streams, such as transaction fees, service charges, and other associated fees. Every transaction processed yields a small percentage, which can accumulate to a significant amount, especially with high transaction volumes. This consistent revenue stream can be a substantial financial boost for a business.

For PayFacs and ISOs, these fees are already likely a key source of revenue but are subsidised by the cost of third-party acquirers. But once these firms become their own acquirers, these subsidies are no longer eating away at a firm’s revenue.

Greater Control and Flexibility: As a merchant acquirer, businesses gain more control over the entire payment processing ecosystem. This control includes managing the merchant onboarding process, handling transaction disputes, and customising payment solutions to meet specific merchant needs. This level of control allows for more tailored and efficient service offerings, enhancing overall merchant satisfaction.

Expanded Market Presence: Merchant acquirers can extend their market reach by offering a broader range of services. This expansion is not limited to just payment processing but can also include value-added services such as fraud prevention, advanced analytics, and customised reporting. By providing these additional services, acquirers can attract a wider array of merchants and differentiate themselves from competitors.

Market Differentiation:  Merchant acquirers can differentiate themselves in a competitive market by offering comprehensive payment solutions. This competitive edge can attract more merchants looking for integrated services. Taking the step away from simply being a PayFac or ISO, merchant acquirers can provide direct and personalised services, making them more appealing to merchants seeking reliable and streamlined payment processing.

Access to Transaction Data: Acquirers have access to extensive transaction data, allowing insights into consumer behaviour, market trends, and merchant performance. This data is invaluable for strategic decision-making, allowing acquirers to optimise their services and identify new business opportunities.

Enhanced Relationships with Merchants: Most third-party acquirers are dependent on PayFacs and ISOs in order to establish beginner relationships with merchants. But stating at a point where you already have direct relationships with merchants, PayFacs and ISOs becoming acquirers are able to provide superior customer service.

This direct interaction helps in building trust and long-term partnerships, which are crucial for business sustainability. Moreover, acquirers can quickly respond to merchant needs and issues, fostering a positive business environment.

Competitive Advantage: In a competitive payments industry, becoming a merchant acquirer provides a significant edge. It allows businesses to offer end-to-end payment solutions, positioning themselves as comprehensive service providers. This holistic approach is appealing to merchants who prefer to work with a single, reliable partner for all their payment processing needs.

Long-Term Growth and Scalability: The role of a merchant acquirer is not just beneficial in the short term but also offers long-term growth potential. The market need for reliable acquirers is already in high demand. Businesses that show themselves as competent and competitive can scale their operations efficiently to accommodate this growth, ensuring sustained success.

Becoming a Merchant Acquirer

Outside of obtaining the relevant regulatory permissions, becoming a principal member of the major card schemes like Visa and Mastercard is at the heart of becoming an acquirer. The more card schemes you are a member of the more diverse your card acceptance will be.

But there’s more to it than just becoming a principal member. A merchant acquirer needs to build and maintain strong relationships with the card schemes. This involves adhering to card scheme rules and maintaining ongoing operational compliance. Regular audits and compliance checks are conducted by the card schemes to ensure the acquirer meets these requirements.

A robust technical infrastructure is also essential for handling transaction processing, fraud detection, and risk management. This infrastructure includes secure payment gateways, advanced data encryption methods, adherence to Payment Card Industry Data Security Standards (PCI DSS) and effective transaction monitoring systems to ensure seamless and secure payment processing.

Conclusion

Deciding to become a merchant acquirer is a significant step that can offer many benefits, including increased revenue, enhanced service offerings, and greater market control.

However, it requires careful management of the regulatory, financial, operational, and technical challenges involved. By understanding the role and benefits of a merchant acquirer, businesses can make informed decisions about when and how to pursue this strategic path.

Become a Merchant Acquirer with AuthoriPay

Looking to enhance your payment services business?

AuthoriPay offers comprehensive support for obtaining your acquiring licence with Visa, Mastercard, and other major card schemes.Our expert guidance simplifies the licensing process, helping you expand your market presence and service offerings effectively.

Contact us today to book a free consultation.