European Merchant Acquiring and Transaction Processing

Published by: Datamonitor

Published: Jul. 28, 2008 - 181 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

Merchant acquiring and transaction processing within Europe - key findings

Belgium - key findings

France - key findings

Germany - key findings

Italy - key findings

The Netherlands - key findings

Spain - key findings

Turkey - key findings

UK - key findings

Table of Contents

Table of figures

Table of tables

Introduction to Merchant Acquiring and Transaction Processing

The term 'processing' refers to a variety of activities in the payment process

The payment process can involve a sizeable chain of participants

The cardholder

The issuer

The merchant

The acquirer

The transaction processor

The scheme

The payment service provider

The term 'processing' refers to a variety of activities carried out by third parties

The merchant acquisition process involves varying numbers of players

The transactional information process involves data flowing from the merchant acquirer to the card issuer

Costs are deducted throughout the transactional fund process

The MSC is the fee paid by the merchant to the merchant acquirer

The interchange fee is paid by the merchant acquirer to the issuer

Some issuers work on a closed loop basis

The processing value chain includes all activities necessary for card payments to occur

In order to avoid confusion, it is important to define the processing value chain

A European bank divides the value chain into policy and operational functions

The value chain is replicated on the issuing and acquiring sides

European banks want to retain the relationship with the customer

In the US, the value chain is less in the control of the banks

The breakdown of traditional processing model is leading to a shift of power in some markets

Acquirers tend to outsource data processing activities

Issuers tend to outsource a wider range of activities

The processing side has consolidated more than the acquiring side

Over time, the European value chain could start to emulate the American model

Merchant Acquiring and Transaction Processing within Europe

The European market has been experiencing steady growth

Pay now cards are prevalent in Europe

Pay later cards

The UK is the biggest payment card market in Europe

Card penetration is also highest in the UK

The acquiring landscape is well developed throughout the region

The acceptance infrastructure has steadily expanded

Cash continues to be the most commonly accepted payment method

Lack of demand and small business size are two major reasons why cards are not accepted by more merchants

Minimum transaction values for card payments are fairly common on average

Charges for MasterCard usage are imposed by around 2.9% of respondents

Discounts on payments and loyalty programs are the key to encouraging card payments

Barclays is the leading acquirer in the aggregate market

Merchants are typically satisfied with their acquiring services overall

SEPA presents both challenges and opportunities to market players

Processors plan to take advantage of the new structure

Most issuers are not concerned by a potential fall in revenue from international transactions

Domestic schemes are likely to survive for the moment

The possible reduction of the multilateral interchange fee could see issuer revenues fall in certain markets

Merchants want the components of interchange to be unbundled and reflect costs more accurately

Merchants argue that the high costs of interchange are to detriment of consumers, as they are forced to pass the charges on in the form of higher retail prices

The industry argues that the current setup balances the cost of the industry over those who benefit

Levels of interchange and MSC have already been subject to domestic regulation in many markets - the general consensus is they are set to fall further

Domestic regulators are pushing to make interchange a more accurate reflection of costs, possibly reducing them to as low as 0.04%

Cuts in interchange will see costs cut and revenue recouped elsewhere, leading to a fall in consumer welfare

A reduction of interchange in Australia gives an indication of the results of a similar cut in Europe

Issuers face two options in the face of falling levels of interchange

Option one: fight the reduction in interchange

Option two: rethink pricing strategies in order to cope with a reduction in interchange

Belgium

The Belgian market was worth €59.8 billion in 2006

Pay now cards are dominant in Belgium

Pay later cards are less important in Belgium

The Belgian cards market is forecast to grow at a CAGR of 5.4% to 2011

Banksys is central to the Belgian processing landscape

Banksys dominates processing in Belgium

ATOS Origin also acquired BankCard Company, a major merchant acquirer

The acquiring landscape is dominated by Banksys

There is one POS terminal for every 90 people in Belgium

Levels of acceptance in the Belgian card market

Lack of demand, and expense are two major reasons that cards are not accepted by more merchants

Minimum transaction values for card payments are relatively rare in Belgium

The application of minimum transaction thresholds for cards is stronger in certain sectors

Charges for credit card usage are imposed by around 2.5% merchants in Belgium

Increasing security and efficiency are the key to encouraging card payments

Banksys is the dominant acquirer in Belgium

Belgian merchants are typically satisfied with their acquiring services

France

The French market was worth €334 billion in 2006

Pay now cards are less important in France

Pay later cards dominate the French market

The French cards market is forecast to grow at a CAGR of 7.1% to 2011

The processing landscape is governed by Cartes Bancaires

Processing is typically kept in-house

The French acquiring landscape is dominated by Crédit Agricole

There is one POS for every 55 people in France

Levels of acceptance in the French card market

Lack of demand and small business size are two major reasons why cards are not accepted by more merchants

Minimum transaction values for card payments are relatively common in France

Minimum transaction value thresholds for payments are common for around a quarter of card payments

Charges for debit card usage are imposed by around 1.8% of respondents in France

Increasing security and efficiency are the keys to encouraging card payments

Merchant acquiring is controlled by Cartes Bancaires

Crédit Agricole is the dominant acquirer in France

French merchants are typically satisfied with their acquiring services

Germany

The German market was worth €475 billion in 2006

Pay now cards are dominant in Germany

Pay later cards are relatively rare in Germany

The German cards market is forecast to grow at a CAGR of 4.7% to 2011

The German processing landscape is dominated by First Data and ATOS

Acquiring in Germany is dominated by Volksbank

There is one POS for every 142 people in Germany

Levels of acceptance in the German card market

Expense and small business size are two major reasons why cards are not accepted by more merchants

Minimum transaction value thresholds for payments are fairly uncommon in Germany

The application of minimum transaction thresholds for cards is stronger in certain sectors

Charges for credit card usage are imposed by around 2.5% of merchants in Germany

Increasing efficiency and security are key to encouraging card payments

Volksbank is the dominant acquirer in Germany

The large majority of German merchants are satisfied with their acquiring services

Italy

The Italian market was worth €176 billion in 2006

Pay now cards are dominant in Italy

Pay later cards are less important in Italy

The Italian cards market is forecast to grow at a CAGR of 7.3% to 2011

Acquirers typically outsource processing to SIA-SSB

Acquiring in Italy is dominated by Banca Popolare

There is one POS terminal for every 52 people in Italy

Levels of acceptance in the Italian card market

Business size and expense are two major reasons why cards are not accepted by more merchants

Minimum transaction values for card payments are relatively rare in Italy

Charges for credit card usage are imposed by around 1.3% of merchants in Italy

Offering discounts and improving security are key to encouraging card payments

Banca Popolare is the dominant acquirer in Italy

Italian merchants are typically satisfied with their acquiring services

The Netherlands

The Dutch market was worth €138.9 billion in 2006

Pay now cards are dominant in the Netherlands

Pay later cards are very uncommon in the Netherlands

The Dutch cards market is forecast to grow at a CAGR of 4.3% to 2011

Processing in the Netherlands is dominated by Equens

Acquiring in the Netherlands is dominated by Interpay

Infrastructure

Levels of acceptance in the Dutch card market

Lack of demand and expense are two major reasons why cards are not accepted by more merchants

Minimum transaction value thresholds for payments are fairly uncommon in the Netherlands

The application of minimum transaction thresholds for cards is stronger in certain sectors

Charges for credit card usage are imposed by around 5.5% of respondents

Decreasing the cost of using cards and increasing security are key to encouraging card payments

Interpay is the dominant acquirer in the Netherlands

Dutch merchants are typically satisfied with their acquiring services

Spain

The Spanish market was worth €204 billion in 2006

Pay now cards are common in Spain

Pay later cards are less common in Spain

The Spanish market is forecast to grow at a CAGR of 8% to 2011

There are three major interbank associations in Spain

Acquiring in Spain is dominated by BBVA

There is one POS for every 34 people in Spain

Lack of demand and expense are two major reasons why cards are not accepted by more merchants

Minimum transaction values for certain card payments are widespread in Spain

The application of minimum transaction thresholds for cards is stronger in certain sectors

Charges for credit card usage are imposed by only 0.5% of merchants in Spain

Discounts on card payments and loyalty programs are the key to encouraging card payments

BBVA is the dominant acquirer in Spain

Spanish merchants are typically satisfied with their acquiring services

Turkey

The Turkish market was worth €115.7 billion in 2006

Pay now cards in are just in the majority in Turkey

Pay later cards account for just under half of all cards in issue in Turkey

The Turkish cards market is forecast to grow at a CAGR of 17.9% to 2011

The processing landscape is under the control of BKM

Acquiring is dominated by Isbank

There is one POS for every 55 people in Turkey

Levels of acceptance in the Turkish card market

Lack of demand and small business size are two major reasons why cards are not accepted by more merchants

Minimum transaction value thresholds for payments are uncommon in Turkey

The application of minimum transaction thresholds for cards is stronger in certain sectors

Charges for credit card usage are imposed by around 0.7% of merchants in Turkey

Loyalty programs and greater promotion are key to encouraging card payments

Isbank is the dominant acquirer in Turkey

Turkish merchants are typically satisfied with their acquiring services

UK

The UK market was worth €749 billion in 2006

Pay now cards are prevalent in the UK

Pay later cards are slightly less common in the UK

The UK cards market is forecast to grow at a CAGR of 6.6% to 2011

Banks in the UK tend to outsource most non-core activities

Acquiring in the UK is dominated by Barclays

There is one POS for every 58 people in the UK

Levels of acceptance in the UK card market

Lack of demand and small business size are two major reasons why cards are not accepted by more merchants

Minimum transaction value thresholds are quite common for card payments in the UK

The application of minimum transaction thresholds for cards is stronger in certain sectors

Charges for credit card usage are imposed by around 8.5% merchants in UK

Introducing loyalty programs and decreasing card usage are key to encouraging card payments

UK merchants are typically satisfied with their acquiring services

Appendix

Supplementary data

Definitions

AAGR

APACS

Average transaction value

Balances outstanding

Bank of England base rate

CAGR

Charge card

Credit card

CVV

Debit card

EMV

Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions

Interchange

Non-standard

OFT

Methodology

Primary research

Secondary research

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Merchant Service Charges across eight European markets, 2004-2008

Table 2: Proportion of cards with minimum transaction spend by sector, Belgium, 2006

Table 3: Proportion of cards with minimum transaction spend, by sector, France, 2006

Table 4: Proportion of cards with minimum transaction spend, by sector, Germany, 2006

Table 5: Proportion of cards with minimum transaction spend, by sector, Netherlands, 2006

Table 6: Proportion of cards with minimum transaction spend, by sector, Spain, 2006

Table 7: Proportion of cards with minimum transaction spend, by sector, Turkey, 2006

Table 8: Proportion of cards with minimum transaction spend, by sector, UK, 2006

Table 9: Number of payment cards in eight European markets

Table 10: Number of transactions on payment cards in eight European markets

Table 11: Value of transactions on payment cards in eight European markets

Table 12: Number of POS terminals in eight European markets

Table 13: Current relevant Datamonitor publications, 2008

Table 14: Future relevant Datamonitor publications, 2008

List of Figures

Figure 1: Issuers often outsource non-core activities to processors

Figure 2: The transactional information process, 2008

Figure 3: Card issuers, processors and acquirers all take their share of the MSC

Figure 4: Value is added to the chain at several points throughout the payment process

Figure 5: The value chain is replicated on the issuing and acquiring side

Figure 6: In the US, the value chain has disintegrated into several separate parts

Figure 7: The value of transactions in the markets measured has grown steadily, 2002-2006

Figure 8: The aggregate pay now market has seen healthy growth, 2002-2006

Figure 9: The aggregate pay later market has seen healthy growth, 2002-2006

Figure 10: In terms of transaction value, the UK has the largest market for payment cards

Figure 11: The UK has the highest payment card penetration at 2.8 cards per person

Figure 12: The aggregate payment market is forecast to slow over the following four years

Figure 13: The number of POS terminals in the aggregate market has increased steadily between 2002 and 2006.

Figure 14: Germany has the highest population per POS terminal

Figure 15: Cash is the most commonly accepted payment type, 2006

Figure 16: Lack of customer demand and small business size are two major reasons why merchants do not accept cards

Figure 17: Minimum transaction values are most commonly imposed on credit card transactions, 2006

Figure 18: On average MasterCard credit cards most frequently attract charges, 2006

Figure 19: Discounts on card payments are seen as a key way to encourage card use

Figure 20: Barclays is the leading acquirer in Europe

Figure 21: Merchants are typically very satisfied with the service they receive from their acquirers

Figure 22: The interchange fees levied by Australian card schemes, 2004

Figure 23: Australian issuers increased annual fees in response to a cut in interchange, 2002 & 2003

Figure 24: The Belgian market has grown at a CAGR of 8.5% from 2002 to 2006

Figure 25: The pay now market in Belgium has seen healthy growth in the 2002 to 2006 period

Figure 26: Growth in the Belgian pay later market has been much more subdued, 2002-2006

Figure 27: The rate of growth in the Belgian cards market is expected to slow, 2002-2011

Figure 28: The number of POS terminals in Belgium has fallen, 2002-2006

Figure 29: Cash is still the most commonly accepted payment type in Belgium, 2006

Figure 30: Lack of customer demand and expense are two major reasons why merchants do not accept cards in Belgium

Figure 31: Minimum transaction values are most commonly imposed on credit card transactions, Belgium, 2006

Figure 32: Visa credit cards most frequently attract charges in Belgium, 2006

Figure 33: Increasing security is seen as a key way to encourage card use, Belgium, 2006

Figure 34: Banksys is the prevalent merchant acquirer in Belgium

Figure 35: Belgian Acquirers are typically satisfied with the service they receive from merchant acquirers

Figure 36: The French market has grown at a CAGR of 8.6% from 2002 to 2006

Figure 37: The pay now market in France has seen healthy growth in the 2002 to 2006 period

Figure 38: The French pay later market has grown at a similar rate to the pay now market, 2002-2006

Figure 39: The rate of growth in the French cards market is expected to slow, 2002-2011

Figure 40: The table of figures is an optional section and can be removed

Figure 41: The number of POS terminals in France has increased steadily between 2002 and 2006.

Figure 42: Cheques are the most commonly accepted payment type in France, 2006

Figure 43: Lack of customer demand and small business size are two major reasons why merchants do not accept cards in France

Figure 44: Minimum transaction values are most commonly imposed on debit card transactions, France, 2006

Figure 45: Visa credit cards most frequently attract charges in France, 2006

Figure 46: Increasing security is seen as a key way to encourage card use, France, 2006

Figure 47: Credit Agricole is the prevalent merchant acquirer in France

Figure 48: French acquirers are typically very satisfied with the service they receive from merchant acquirers

Figure 49: The German market has grown at a CAGR of 8.7% from 2002 to 2006

Figure 50: The pay now market in Germany has seen healthy growth in the 2002 to 2006 period

Figure 51: The pay later market in Germany has seen healthy growth in the 2002 to 2006 period

Figure 52: The rate of growth in the German cards market is expected to slow, 2002-2011

Figure 53: The number of POS terminals in Germany has increased steadily between 2002 and 2006.

Figure 54: Cash is still the most commonly accepted payment type in Germany, 2006

Figure 55: Expense and business size are two major reasons why merchants do not accept cards in Germany

Figure 56: Minimum transaction values are most commonly imposed on credit card transactions, Germany, 2006

Figure 57: MasterCard credit cards most frequently attract charges in Germany, 2006

Figure 58: Increasing efficiency is seen as a key way to encourage card use, Germany, 2006

Figure 59: Volksbank is the prevalent merchant acquirer in Germany, 2006

Figure 60: The large majority of German merchants are satisfied with their acquiring services

Figure 61: The Italian market has grown at a CAGR of 4% from 2002 to 2006

Figure 62: The pay now market in Italy has seen healthy growth in the 2002 to 2006 period

Figure 63: The pay later market in Italy has seen healthy growth in the 2002 to 2006 period

Figure 64: The rate of growth in the Italian cards market is expected to accelerate, 2002-2011

Figure 65: SIA-SSB provides a full range of outsourcing to the Italian market

Figure 66: The number of POS terminals in Italy has increased significantly between 2002 and 2006.

Figure 67: Cash is still the most commonly accepted payment type in Italy, 2006

Figure 68: Lack of customer demand and not being accepted by an acquirer are two major reasons why merchants do not accept cards in Italy

Figure 69: Minimum transaction values are most commonly imposed on debit card transactions, Italy, 2006

Figure 70: Domestic debit cards most frequently attract charges in Italy, 2006

Figure 71: Offering discounts on card purchases is seen as a key way to encourage card use, Italy, 2006

Figure 72: Banca Popolare is the prevalent merchant acquirer in Italy, 2006

Figure 73: Italian merchants are typically satisfied with their acquiring services

Figure 74: The Dutch market has grown at a CAGR of 13.3% from 2002 to 2006

Figure 75: The pay now market in the Netherlands has seen strong growth in the 2002 to 2006 period

Figure 76: The pay now market in the Netherlands has seen strong growth in the 2002 to 2006 period

Figure 77: The rate of growth in the Dutch cards market is expected to slow, 2002-2011

Figure 78: The number of POS terminals in the Netherlands has increased steadily between 2002 and 2006.

Figure 79: Cash is still the most commonly accepted payment type in the Netherlands, 2006

Figure 80: Lack of customer demand and expense are two major reasons why merchants do not accept cards in the Netherlands

Figure 81: Minimum transaction values are most commonly imposed on debit card transactions, the Netherlands, 2006

Figure 82: Visa credit cards most frequently attract charges in the Netherlands, 2006

Figure 83: Decreasing the cost of using cards is seen as a key way to encourage card use, Netherlands, 2006

Figure 84: Interpay is the prevalent merchant acquirer in the Netherlands

Figure 85: Dutch Acquirers are typically satisfied with the service they receive from merchant acquirers

Figure 86: The Spanish market has grown at a CAGR of 12.5% from 2002 to 2006

Figure 87: The pay now market in Spain has seen healthy growth in the 2002 to 2006 period

Figure 88: The pay now market in Spain has shown strong growth in the 2002 to 2006 period

Figure 89: The rate of growth in the Spanish cards market is expected to slow, 2002-2011

Figure 90: The number of POS terminals in Spain has increased steadily between 2002 and 2006.

Figure 91: Cash is still the most commonly accepted payment type in Spain, 2006

Figure 92: Lack of customer demand and expense are two major reasons why merchants do not accept cards in Spain

Figure 93: Minimum transaction values are most commonly imposed on credit card transactions, Spain, 2006

Figure 94: Visa credit cards most frequently attract charges in Spain, 2006

Figure 95: Discounts are seen as a key way to encourage card use, Spain, 2006

Figure 96: BBVA is the prevalent merchant acquirer in Spain

Figure 97: Spanish merchants are typically satisfied with the service they receive from merchant acquirers

Figure 98: The Turkish market has grown at a CAGR of 29.9% from 2002 to 2006

Figure 99: The pay now market in Turkey has seen strong growth in the 2002 to 2006 period

Figure 100: Growth in the Turkish pay later market has been much stronger, 2002-2006

Figure 101: The rate of growth in the Turkish cards market is expected to slow, 2002-2011

Figure 102: The number of POS terminals in Turkey has grown steadily between 2002 and 2006.

Figure 103: Cash is still the most commonly accepted payment type in Turkey, 2006

Figure 104: Lack of customer demand and small business size are two major reasons why merchants do not accept cards in Turkey

Figure 105: Minimum transaction values are most commonly imposed on credit card transactions, Turkey, 2006

Figure 106: MasterCard credit cards most frequently attract charges in Turkey, 2006

Figure 107: Loyalty programs are seen as a key way to encourage card use, Turkey, 2006

Figure 108: Isbank is the prevalent merchant acquirer in Turkey

Figure 109: Turkish merchants are typically satisfied with the service they receive from acquirers

Figure 110: The UK market has grown at a CAGR of 10.5% from 2002 to 2006

Figure 111: The pay now market in the UK has seen strong growth in the 2002 to 2006 period

Figure 112: The pay now market in the UK has seen strong growth in the 2002 to 2006 period

Figure 113: The rate of growth in the UK cards market is expected to slow, 2002-2011

Figure 114: The number of POS terminals in the UK has increased steadily between 2002 and 2006.

Figure 115: Cheques are the most commonly accepted payment type in UK, 2006

Figure 116: Lack of customer demand and small business size are two major reasons why merchants do not accept cards in the UK

Figure 117: Minimum transaction values are most commonly imposed on credit card transactions, UK, 2006

Figure 118: MasterCard and Visa credit cards most frequently attract charges in the UK, 2006

Figure 119: Loyalty programs are seen as a key way to encourage card use, UK, 2006

Figure 120: Barclays is the prevalent merchant acquirer in the UK

Figure 121: UK merchants are typically satisfied with the service they receive from merchant acquirers

Abstract

• In-depth coverage of acquiring and processing in Belgium, France, Germany, Italy, Netherlands, Spain, Turkey, and the UK
• Discusses the key trends in European processing, as well as the impact of SEPA and interchange regulation on the future landscape
• Output from Datamonitor's European Merchant Survey highlights the key trends in payment acceptance and acquiring, including acquirer market shares
• Examines merchant views on their acquirer, as well as how to encourage card payments, at the market and regional level

• Understand how the payment card market is evolving in your market, giving valuable insight and competitive edge
• Discover the likely outcome of SEPA implementation and a possible reduced level of domestic interchange on the payment industry
• Learn how to encourage more card payments in your market

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