You’ve recently published a new report on acquiring strategies among merchants and PSPs. What were your objectives here and what are the key trends you picked up from the study?
So much has changed in the merchant landscape in the last couple of years – and in 2020 in particular. We wanted to explore how these changing technologies, shopper habits, and consumer expectations have affected the acquiring strategies of merchants and PSPs – as well as what operational, financial, and competitive advantages they are getting from their chosen approach.
More than ever, merchants need to provide an excellent customer experience and reduce their operational costs, and a big part of the ability to do this sits with their payment processing and acquiring strategies.
The biggest trend we uncovered is a growing movement towards using multiple acquirers. The survey finds that 57% of merchants currently have a multiple acquiring arrangement, with 44% of merchants working with between two and five acquirers. Interestingly, 40% of merchants who work with a single acquirer also say they are looking to change this within the next year (2021).
The trend is even more pronounced among PSPs; 71% currently have multiple acquiring arrangements in place – and 70% plan to increase the number of acquirers they use within the next 12 months.
What need lies behind merchants and PSPs working with more than one acquirer?
There are several, and of course, it varies depending on the merchant sector, size, geographies, and several other factors. Our study finds that the three highest-scoring drivers common across both merchants and PSPs are: the need for greater resilience, the need to reduce operational costs, and the need to improve conversion rates.
Multiple acquirer relationships allow merchants to maintain business continuity if an acquirer experiences a service outage or a business failure. Essentially, they have a backup plan and can quickly re-route transactions to another acquirer.
But the need for resilience goes beyond this. Merchants don’t want to risk being unable to authorise a transaction - if an order is declined, having the option to retry that transaction seamlessly with another acquirer is extremely valuable. It is apparent that PSPs also recognise this benefit: 70% of the PSPs we surveyed say they can reroute transactions to different acquirers based on set criteria and a further 10% plan to add this capability in future.
Card fees and payment resources are still a big issue for merchants and keeping those costs down is a strong motivator for a multi-acquiring strategy. Minimising declines helps with this anyway, but a dynamic, multi-acquirer routing strategy can help ensure each transaction is routed to the most cost-effective acquirer. Additionally, having the flexibility to connect to multiple acquirers provides a bigger price negotiation power from the onset.
For PSPs, it makes even more sense to work with multiple acquirers. PSPs are working with multiple merchants in different markets and sectors – those merchants are going to have different needs which are unlikely to all be fulfilled by a single acquirer. Being able to work with different acquirers means PSPs can more readily support a broader range of merchants, with different risk levels, market needs, and customer preferences.
From our survey, it’s clear that merchants in the digital goods sector, for example, are keen to support more alternative payment methods; in the grocery segment, margins are thin and they’re focused on reducing costs. Omnichannel retailers are looking to implement different customer journeys and cross-border merchants are thinking about how they can deploy quickly and easily to new regions. In each case, having the flexibility to choose, and switch between, the most appropriate acquirers can give you the edge.
What kind of benefits are merchants and PSPs gaining from working with multiple acquirers?
From the study and the experience of our customers, we’ve seen some tangible benefits. One of the most marked, and measurable, is the ability to improve conversion rates.
Among the merchants in our survey with multiple acquirer relationships, 85% have seen an increase in conversion rates; for 23% this increase has been more than 10%. The uplift is likely to have come from increased acceptance (via more flexible, resilient routing) and as a result of merchants being able to support the right mix of payment methods for their customers.
Among ACI’s PSP customers, we see an average 16% uplift in conversion for those working with multiple acquirers.
For some segments and merchant types, the impact of changing acquirer strategies can be even greater. One of our online gaming customers gradually switched traffic from a global acquirer to a local acquirer in a major market, retaining the global provider as a backup. The result? A 42% boost in conversion rates.
Surely, working with more acquirers means more complexity and more relationships to manage. How can merchants and PSPs get around this?
Of course, more relationships mean more management – but it is clear from our survey that the benefits of multi-acquiring outweigh any disadvantages, particularly for Tier 1 merchants that are investing in customer experience, for those with significant growth ambitions, and for merchants expanding across borders. Additionally, multi-acquiring delivers clear benefits for merchants in complex verticals such as fuel, or in verticals where immediacy is critical, such as digital content.
This is where an acquirer-agnostic payments gateway really adds value. By leveraging the gateway provider’s connections (to cross-border and local acquirers and to alternative payment methods) and securing the ability to add new ones, merchants can choose the setup that suits them, and adapt it with ease over time – without having to commit costly internal resources to do so.
Looking ahead, what do you think are going to be the key payments challenges for merchants and PSPs to address in the next two years, that will make a multi-acquiring strategy increasingly important?
Flexibility and control will be critical for both merchants and PSPs. We’ve seen how quickly customer behaviour and needs have changed in 2020 and this has highlighted the need for agility; for merchants – and the PSPs who support them - to be able to adapt to customer demand and changing circumstances with ease. Being able to flex and tailor your payments and acquiring strategies will help to ensure that you can adapt and thrive, whatever the future holds.
Read the new ACI research on acquiring strategies for PSPs and Merchants
About Benny Tadele
Now VP, Global ecommerce at ACI Worldwide, Benny Tadele has worked in merchant payments for over 13 years. His focus in on providing payment solutions that enable merchants to deliver tailored customer journeys, in-store and online – with an emphasis on speed, security, and ease of use. Benny has held leadership roles in Engineering, Professional Services, and Product Management. He has a background in high performance computations, machine learning and in deploying enterprise-wide solutions.
About ACI Worldwide
ACI Worldwide is a global software company that provides mission-critical real-time payment solutions to corporations. Customers use our proven, scalable and secure solutions to process and manage digital payments, enable omni-commerce payments, present and process bill payments, and manage fraud and risk. We combine our global footprint with local presence to drive the real-time digital transformation of payments and commerce. Learn more at www.aciworldwide.com
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