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Table of Contents

Lead Story

2008: Keeping it sticky


Industry Update

Mega-mergers' impact on payments

Mega-mergers' impact on payments

E-commerce fraud hits $4 billion

Outsmarting data thieves

ACH evolving and prospering DIVAs honored

2009 Calendar of events



Casey Leloux

The prepaid, m-payments intersection

The archetype in the mirror


What history teaches about change

Patti Murphy
The Takoma Group

The case for collecting fees

Ken Musante
Humboldt Merchant Services


Street SmartsSM:
Dreams fulfilled: Six easy steps

Jason Felts
Advanced Merchant Services

The promise of September 2009

Lane Gordon

Capturing verticals

Nancy Drexler
SignaPay Ltd.

The skinny on thin client

Dale S. Laszig
DSL Direct LLC

The law of fine print

Adam Atlas
Attorney at Law

Ease the pain

Daniel Wadleigh
Marketing Consultant

Company Profile

Affirmative Technologies Inc.

New Products

Payments in your pocket

MicroSecure Card Reader
ProPay Inc.

Multifactor ID for RDC

Excella MDX
MagTek Inc.


Take action, banish fear





Resource Guide


A Bigger Thing

The Green Sheet Online Edition

December 22, 2008  •  Issue 08:12:02

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Mega-mergers' impact on payments

According to a new research report by Mercator Advisory Group, several large commercial banks in the United States are involved in mergers that stand to significantly impact the payments industry. In 2008, Bank of America Corp. bought Merrill Lynch & Co. Inc. and Countrywide Financial Corp.; JPMorgan Chase & Co. acquired Washington Mutual Inc.; and Wachovia Corp. was purchased by Wells Fargo & Co.

David Fish, Senior Analyst, Credit Advisory Service at Mercator, said that in order to maintain market dominance, consolidation was inevitable in the top-tier financial institutions. "Yes, the economy is a driver, and key indicators of merger activity and consumer payment trends point to a recession in its beginning stages, but really it's more of a backdrop," Fish said. "More importantly, I think consumer and merchant sentiment in the U.S. regarding financial services is shifting. They are asking more of their banks. Clients now want a better relationship, to have an element of partnership."

A simple plan

Mercator believes the recent mega-mergers originated - aside from the obvious financial turmoil those acquired banks suffered - from a simple need to compete.

"With Bank of America and Wells Fargo now truly national banks - and the top four banks holding $7.5 trillion of the banking industry's $13.7 trillion in assets - there are opposing needs affecting trends in bank marketing," said Elizabeth Rowe, Group Director of Mercator's Banking Advisory Services division. "The largest banks need to gather more core deposits and reenter the retail lending market.

"For smaller banks, there is a need to protect market share against large banks, since many are entering new geographical markets with their acquisitions and subsequent expanding branch and ATM networks."

Ace in the hole

Additionally, Fish feels smaller ISOs, regional banks and credit unions may have the upper hand when it comes to merchant and consumer stickiness. Overdraft charges, ATM surcharges and other fee-based revenue inflate the profits of larger financial institutions, but those cardholder costs are also the very thing that causes consumer discontent.

"I think that the level of satisfaction with smaller financial institutions is somewhat higher than with the larger ones," Fish said.

"I think the more indispensible you are as a partner to your clients than the less likely they are to seek a new relationship. That kind of value add is something I've been talking about for years. Develop a package with the most effective number of services that makes the most sense for your organization and the merchant.

"It may take some fine tuning, but certainly anything related to cash-based payments is fair game, including ACH processing, certainly electronic checks. If it's an e-commerce merchant, there are myriad alternative payment platforms. And gift cards in this space are still big, even though they've been getting a lot of bad press lately."

Pay it now

Fish noted a significant shift toward debit payments and away from credit. This shift, coupled with the tightening credit environment, will accelerate consumer adoption of prepaid and debit payment types, including cards and checks. Cash, holding a low profile the past few years, will likely also see a resurgence.

Fish said Mercator recognizes the value inherent in all types of prepaid instruments. The firm believes private label cards (merchant-branded, closed loop gift cards) are an important value add for ISOs to bring to the market. Gift cards are an excellent retention strategy because the nature of the integration of gift card processing helps in the overall support of payment acceptance at the POS.

"It really boosts that merchant and consumer sticky factor exponentially," Fish said. "And like I said, the more dependent the merchant is on their provider, the less likely they are to attrit.

"What it boils down to is that smaller institutions, in order to compete against these big guys, have been moving toward this banking model for a number of years now. I think we're going to see more innovative strategies being used at community and regional levels. And those small institutions are going to try to develop as much value for their customers as they possibly can."

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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