Click here to read updated highlights from 2020.
The Strawhecker Group (TSG) recently released its annual Directory of U.S. Merchant Acquirers, a report that details key business statistics on 256 of the nation’s payment processing players. The report covers companies with trillions of dollars in processing volume, to regional ISOs with a few dozen merchants in their portfolio.
Collectively, the companies in this directory are estimated to represent over 90% of all card payment volume in the country. Here are ten insights TSG found when analyzing this year’s directory:
1) The U.S. Merchant Acquiring Market is Top Heavy
The United States generates approximately $5.5+ trillion in card spending each year. The largest ten merchant acquirers directly process around 80% of that dollar amount, leaving 20% for the remaining ~1,000 U.S. independent sales organizations and select other in-house processors. 20% of the multi-trillion-dollar pie is still substantial.
2) The new Worldpay is now the largest U.S. merchant acquirer
With Vantiv’s Worldpay acquisition, the new Worldpay has the highest amount of card processing volume in the country, as well as the most transactions processed.
3) Clover and Poynt are the most widely offered smart terminal solutions
ISOs that utilize First Data for at least one of their processing providers widely promote the Clover point of sale system to their merchant clients. No other point of sale system appears to have as much support from the ISO community. Poynt is also a commonly offered product by U.S. acquirers.
4) Excluding Retail & Restaurant, Hospitality/Lodging, Healthcare, and Nonprofit were the most widely supported industry verticals; service businesses and education were close behind
Certain industry verticals like retail, restaurant, service-oriented businesses, and lodging establishments are like grains of sand in the acquiring market and are widely supported. Modern acquirers have been leveraging data and are starting to specialize in various other verticals that prove to be lucrative. Verticals like healthcare, nonprofit, and education offer above average net revenue gains with high upside for growth. A recipe for acquiring success.
5) 30% of acquirers have multiple sponsor bank relationships
While one sponsor relationship is most common, a large portion of merchant acquirers disperse their processing volume risk to multiple sponsor banks. Many have three or more sponsor relationships.
6) 20 of the 256 acquirers analyzed have an in-house front-end processing system
The resources required to obtain and manage an in-house system are sizable. This figure has been mostly static over recent years.
7) Square is approaching the top 10 players, based on processing volume
Square’s estimated U.S. processing volume has continually increased over the years, bringing the company up to 11th place overall. Square has continually built up its technology offerings and has been partnering with various software players to reach businesses upstream from its initial base of lemonade-stand style operations. This strategy has proven successful.
8) M&A activity among the top 50 players has been extensive
Multiple players among the top 50 merchant acquirers (based on processing volume) now have a new owner. Some notable deals included Vantiv (#4 in 2016) acquiring Worldpay (#11 in 2016); First Data (#2 in 2016) acquiring CardConnect (#26 in 2016) and BluePay (#34 in 2016); TSYS (#10 in 2016) acquiring Cayan (#27 in 2016); and Advent International (private equity) acquiring Clearent (#46 in 2016).
9) Banks have a significant role among the largest U.S. merchant acquirers
17% of the merchant acquirers analyzed are bank-owned or partially bank-owned entities. 7 of the top 15 players (based on total processing volume) are bank-connected acquirers. Banks have found that card-acceptance solutions are a natural and rewarding cross-sell for business clients.
10) California was the most common headquarter state for an acquiring operation
47 of the 256 merchant acquirers analyzed have chosen this tech-driven land to be their home. Texas was next with 23 office locations. Florida and Georgia tied for third with 20 locations.
The Strawhecker Group (TSG) is a fast-growing analytics and consulting firm focused on the electronic payments industry. The company serves the entire payments ecosystem, from fintech startups to Fortune 500 companies. The firm provides its clients with advisory services, research and analytics to help them plan and execute their strategic initiatives. Based in Omaha, a recognized payments industry hub, TSG is an established leader in this high-growth, ever-evolving space.