Many merchant-services executives have complained for years about so-called margin compression, a relentless loss of profitability driven by competition on price per transaction. But now two researchers argue acquirer profitability, far from collapsing, is actually much better than widely thought.
“There has been a lot of talk about margin compression, but the reality is margins have been expanding,” Rick Oglesby, senior researcher at Centennial, Colo.-based Double Diamond Payments Research, tells Digital Transactions News.
Oglesby and Marc Cochrane, a researcher and consultant at Double Diamond, last week released a report called “Acquiring Acquirers: Why Insiders Are Bullish on the Acquiring Sector” that looks at acquirer profitability as one factor among many that make acquirers attractive acquisition candidates.
The authors acknowledge that independent sales organizations and merchant processors do indeed confront significant pressure on merchant pricing. In recent years, much of this has been brought on by the nearly 5-year-old Durbin Amendment, which not only capped debit card rates but also led to merchant demand for greater pricing transparency in the form of so-called interchange-plus pricing.
Digital Transactions, February 23, 2015
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