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Vantiv Inc.’s deal to acquire Mercury Payment Systems LLC was noteworthy for its size—the deal carried a $1.65 billion price tag—but it was also exemplary of a key industry transformation from distribution-centric to product-centric acquiring.

For decades, the merchant-acquiring industry has revolved around selling the services of barely differentiated payment processors packaged in barely differentiated payment terminals. Independent sales organizations (ISOs) became the prevalent model for selling payment services, and distribution reach became the primary differentiator.

So if you haven’t yet gotten the message, it’s now ISVs—not ISOs—that have the superior payments-distribution model. If you want to make money in payments, the lesson is clear: You must either sell through the ISV, or you must be an ISV. Both require a new product strategy. Neither requires an ISO.

Digital Transactions, May 14, 2014