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Vertical Integration and the Payments Value Chain
Abstract: Lower transaction volumes, tighter transaction processing margins, offshore hardware competitors, PCI compliance mandates, and the economics of payments processing are pushing key players in the payments industry to rethink their business models. Led by VeriFone, nearly all POS hardware makers are either evaluating or offering software-based services to add monthly recurring revenue as a sweetener to the increasingly thin gruel of hardware margins. Processors like First Data and Heartland Payment Systems are building, via contract manufacturers, their own terminal lines to deliver new capabilities and, along the way, strengthen revenues and account control. Heartland???s direct selling model, with in-house merchant services sales, takes the vertical trajectory even higher. Such vertical integration is a significant trend that will affect how small merchants in particular acquire and use payment services. This trend also demands careful consideration by Tier 1 merchants when evaluating overall card handling costs in general and security options in particular.
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This is a Mercator Advisory Group Viewpoint and is available through a membership services relationship. It is also available for one-off purchase. About Mercator Advisory Group
Mercator Advisory Group is the leading, independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors.
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