Acquirers throughout Australia and New Zealand are facing margin pressures and new entrants into the market. Global acquirers have now set their sights on the Pacific, making it an imperative for acquirers within the region to transform or risk getting left behind. Ali Yaseen, National Business Manager for New Payments at A2B Australia, and Ciaran Chu, ACI’s Head of Acquiring, share global perspectives and local insights about the key challenges facing acquirers in the region.
Geoff Tunbridge: Ciaran, from your perspective, working with customers and partners around the globe, what are the biggest challenges for acquiring in the Pacific region, and how does that relate to what we’re seeing happening around the world?
Ciaran Chu: The Pacific region’s public health response to COVID-19 has probably been the best in the world, but what I’ve been seeing globally is that some of the biggest challenges facing acquirers have been exacerbated by the pandemic. Acquirers have had issues for the last several years when it comes to defining their future business models, as the traditional business model — predicated upon interest and transaction fees — has faltered. The pandemic has really put this into sharp focus.
And what has obviously happened with the pandemic is that a lot of the transaction fees were coming from smaller merchants that had to close shop during the initial wave of drastic lockdowns, which obviously meant that acquirers missed out on revenue. Ultimately, that has pushed them to move away from the commoditized business model and think more about value-added services and creating new value for merchants.
For acquirers, it’s imperative that they have the right payment methods for consumers to be able to pay merchants. There is some very interesting research that came out recently, which said 25 percent of consumers would abandon their transactions if they do not have the right payment methods. That’s something that is at the forefront of merchants’ minds. It’s certainly not the only thing though. There are a couple of others that are more regionally focused and probably give a perspective on the Pacific region.
If we look at Europe, obviously open banking is really big. A lot of the acquirers that I talk to, typically the incumbents, are looking at how they can benefit from the scale of merchant relationships. So really, that’s around platform scale and how they can potentially use their underlying infrastructure and their regulatory knowledge to provide differentiation and partner up with some of the newer entrants that are coming in and looking to be digital-first.
In Latin America, the real game is around financial inclusion as there’s a massive unbanked and underbanked market. We’re seeing a lot of growth there and it’s really an arms race to see who can capture all those consumers and merchant payment opportunities. And obviously the most advanced economy and the one that’s probably bounced back quickest from COVID is Asia.
I think the really interesting piece from an acquiring perspective in Asia is the rise of the super apps and how they can actually provide value-added services through things like lending to help consumers make the most use of their money, and ultimately ensure that they’re creating value.
Overall, there’s a lot going on globally. What’s key is to acknowledge that the pandemic has more quickly brought market conditions that have been building up over the last several years. And really, it’s a shift away from relying upon transaction-based income and actually more value creation, which is good for merchants and obviously good for us as consumers as well.
GT: I think Ciaran touched on more than a handful of challenges and opportunities facing the acquiring market and acquiring businesses. Ali — as a leader in diversified forms of acquiring or diversified businesses in Australia, what are you seeing within this market that’s really creating challenges for the acquiring businesses?
Ali Yaseen: I think it goes back to what Ciaran said earlier and that is, you really see a lot of the traditional acquiring becoming commoditized. And you do have large international players offering acquiring services in Australia as in other places where that’s going to often be at a price much lower than local players. And if that is going to be what we compete on as local players in the acquiring space, we’re not really going to retain our customers.
So the ongoing big challenge for us in payments is how do we deliver a great user experience at the point of sale? And that’s what we’ve focused on. Going back to what Ciaran mentioned about value added services, that can span many different areas. We look at how to address items like having integration in taxis. Across 30,000 terminals, how can we get these terminals to pull the right information from the journey and then embed them into the payments process?
Now you change that over the years to in-app, in-vehicle and in other areas. But the real challenge is how do we find a way to provide a better user experience than say, “global acquirer A is going to provide that at a much lower rate?” I think by doing that, we can shift the conversation from commodity pricing to value. And I think that’s the opportunity we have for local acquirers — to focus on user experiences to drive better value as opposed to finding a way to make payments slightly more efficient and compete on scale, which is becoming harder.
Catch up with our on-demand webinar where Ciaran and Ali discuss in depth how acquirers in the Pacific can fend off competition and grow new revenues: Staying Ahead of Global Acquirers in the Pacific