A new report from Aite Group, LLC provides an overview of the merchant value chain with emphasis on the economics surrounding the card payment industry, and includes a look at the revenue streams and operating costs of ISOs and acquirers.
The report also gives an overview of the market opportunities that exist for processors and POS terminal manufacturers.
In the report, Aite Group reveals that while there is an undeniable margin squeeze on the discount rate charged by ISOs and acquirers, the net spread in merchant acquiring has been rising steadily. This not only contradicts the industry belief of margin compression, but highlights how successful ISOs and acquirers have been in increasing their revenues, which are expected to grow from $70.5 billion in 2008 to $95.9 billion in 2012.
The acquiring model started by Discover and emulated by American Express will allow ISOs and acquirers to move from a reseller agreement to an acquiring agreement. This model will offer ISOs and acquirers new revenue opportunities.
“ISOs and acquirers will be growing their revenues more quickly than the rest of the industry because of Discover’s and American Express’ acquiring strategy and also because of the value-add products and services. ISOs and acquirers will be able to increase their revenue opportunities even more by integrating with software manufacturers that cater to specific industries,” says Adil Moussa, analyst with Aite Group and author of this report.