ETA, Goldman Sachs Research Release Annual Merchant Acquirer and ISO Survey

July 18, 2013 – The Electronic Transactions Association (ETA), the trade association of the global electronic payments industry, and Goldman Sachs Global Investment Research, a leading provider of global industry research, today released the findings of the second annual ETA-GS Merchant Acquirer and ISO Survey. Among key findings, the survey revealed merchant acquirers prefer to partner with new entrants to the electronics landscape; loyalty-based solutions lower attrition and open new revenue streams; and merchant acquirers have a positive outlook on the future of electronic payments, with 60 percent expecting volume growth to accelerate.

The survey asked 77 merchant acquirers, ISOs and point-of-sale (POS) solutions providers to address key risks to incumbent models, potential mitigation strategies and opportunities for further growth. The survey follows the December 2012 ETA/Goldman Sachs report, “Payments Deep Dive: A closer look at the threats and opportunities posed by new entrants,” which provided investment-sector analysis of new entrants in the payment space.

Key findings of the ETA-GS Merchant Acquirer and ISO Survey – 2013 include:

• New entrants create opportunities for incumbent payments companies. Most respondents (90 percent) suggested new entrants represent only 25 percent of attrition, and only 10 percent of respondents believe new entrants will negatively impact pricing at the SME merchant level.
• Partnerships and value-added services are a key mitigation strategy. Forty percent of respondents preferred to partner with new entrants to mitigate risk, and merchant acquirers expect to offer many value added services over the next year, including mobile point-of-sale (mPOS), e-commerce and loyalty solutions.
• Loyalty solutions could improve retention and profitability. Most respondents see loyalty-based solutions and value-added services – such as targeted offers, advertising and coupons – could lower attrition or open new revenue streams. Merchants are willing to pay 2 to 4 times the merchant discount rate (MDR) for loyalty-based solutions.
• In the near term, POS appears more exposed to disruption. Most respondents believe terminal manufacturers are most at risk from new entrants and mPOS solutions.
• There is a favorable backdrop for 2H13 acceleration. The U.S. merchant acquiring and ISO community are positive about the 2H13 backdrop, with 60 percent of respondents expecting payment volume growth to accelerate and 38 percent expecting it to remain stable.

The full research report is available as a benefit to ETA members at www.electran.org. For more information about ETA and member benefits, please contact Del Baker at [email protected]. For media inquiries and more information on the ETA-GS Survey on New Entrants in Payments, please contact Meghan Cieslak at 202-677-7406 or [email protected].