Merchant Processing Pricing Benchmark Study

Additional Information

About TSG

The Strawhecker Group (TSG) is a management consulting company focused on the payments industry. The company specializes in providing financial institutions, merchant acquirers, card associations, ISOs, processing companies, large merchants, and the investment community with advisory services to maximize their growth and profitability. TSG is also a resource of merchant acquiring industry research, benchmark studies and developing trends.

TSG is composed of seasoned veterans of the payments industry. Both Partners and Associates of the firm have held key senior management positions at leading industry companies including First Data, VISA USA, Humboldt Merchant Services, RBS WorldPay, Cardservice International, iPayment, Alliance Data, RapidAdvance, Accenture Consulting, Redwood Merchant Services, Chase Paymentech, as well as other top financial institutions and ISOs.

Over the last three years, TSG has provided services to 30 of the top 50 U.S. Acquirers and has completed over 300 projects for more than 175 different clients. TSG has recently performed Transaction Due Diligence Services for financial institutions including Goldman Sachs, Comerica Bank, Prudential, Brantley Partners, Claritas Capital, Arsenal Capital, Merrick Bank, and First National Bank.

TSG was named 2010 Business Partner of the Year by the Electronic Transactions Association (ETA). ETA is an international trade association which represents companies who offer electronic transaction processing products and services. Other nominees for this award included Discover, TSYS, National Processing Company (NPC) and Security Metrics.

Benchmark Objective

During late spring 2011, The Strawhecker Group surveyed the merchant acquiring industry to determine the prevailing line item pricing rates for merchant processing. The objective of this unique Benchmark Study was to explore the cost of key pricing elements throughout the US merchant acquiring industry. The study included merchant acquirers who use third-party providers for front-end authorization and back-end settlement services. The intent of this study was to provide clients a credible reference source that would allow them to compare their costs for processing products and services with those of other merchant acquirers.

Transaction volume data for each participant was collected to allow segregation of results into four broad volume bands. In total, information was gathered from 58 front-end authorization portfolios and 50 back-end settlement relationships, providing each volume band with ample data points. Participants included financial institutions and independent sales organizations.

Each data contributor is being issued a mini-report that compares their own key line item costs for front-end authorization and back-end settlement processing to those of their respective volume peers. With this personalized information, study contributors will have an excellent benchmark tool to compare the competitiveness of their current processing expenses versus those of their peers.

Study Objective

The objective of the study is to provide acquirers with a credible benchmark tool for comparing the costs of merchant acquiring processing services and products at various volume bands.

Study Methodology

Acquirers were invited to participate in the study in May/June 2011; these responses were combined with other recent processing cost data collected by TSG. The data questionnaires and processing data were then compiled and analyzed by The Strawhecker Group. Every attempt was made to ensure a comparative study. Given that multiple processors are used by some participants, the data was reviewed qualitatively and for consistency.