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What does consolidation really mean for credit card transactions?

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When looking back at payments in 2011, there is one thing that will stand out above all else: acquisitions. And although deals have always happened within the industry, this year has seen a real surge in the amount.
Were not just talking about large corporations buying up smaller companies either, the year has been littered with deals that have turned heads beyond payments, making headlines across the business world.
Deals like Mastercards acquisition of DataCash have meant a real consolidation within the payments space, with fewer firms controlling more aspects of the entire payments chain. However, the real question is, what does this ultimately mean for the customer?
A concern of consolidation is that the marketplace becomes less competitive. Take ACIs purchase of S1 for example. The two firms have been fighting for the same customers for a number of years. Did ACI buy S1 because their products were complementary, or did they want to take S1 out of the competition? Ultimately, the motivation for the acquisition will affect the customer. And when youre talking about acquisitions on this scale, the firms dont become one well-oiled machine overnight. Theres going to be a lot of teething issues that theyre going to have to go through which could have a knock-on effect on their customers.
When a merger promises to be all things to all men, customers have to ask whether this is viable. For instance, should Verifone be providing the hardware, the point of sale application and the payments service behind it – which theyll be able to do with their acquisitions of both Global Bay and Point – all the way through to the bank? And in Mastercard and Visas case, you can add the issuing of the card to that chain.
The landscape that this will create is not yet fully known. However, similar situations in the past – for instance when the payments terminals industry became consolidated – created opportunities for niche service providers to get their offerings across. This is key. What the customer wants above all else is choice. Admittedly the simplicity of having one company deal with the entire solution will bring certain benefits, but if a customer feels that theyre not in control of all aspects of their solution then they may well look elsewhere.
Were in a very interesting period within the payments industry – and not just for customers. Payments firms are having their relationships tested too, as they go from being partners to potential competitors, or vice versa. What customers have to do is decide whether these acquisitions are for their benefit, and make their choices accordingly.

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  • Posted On April 2, 2012
  • Published articles 10

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