A new report from SRM, “Transforming Acquirer Profitability “ highlights the challenges faced by acquirers and reveals how a new solution from SRM and Torus delivers better data and management information to transform the economics of this struggling sector.
Today’s acquirers work in an environment where margins continue to be squeezed through rising operating costs, regulatory pressures, and constantly altering scheme fees. Cost complexities make it difficult to understand where fees can be recovered from merchant clients, and how these fees affect acquirer profitability.
Different transaction features can generate different costs, while scheme fee structures continue to evolve. For acquirers processing millions – or billions – of transactions, small discrepancies can quickly become significant amounts of money. Study after study has shown acquirer margins in decline, even as cost pressures and regulatory compliance burdens grow.
What if? The economics of better data.
In their new report, SRM found that the acquiring industry has the potential to reduce operational costs by up to $1 billion over five years, plus recover an additional $3–5.5 billion in under-recovered fees, through more accurate data. The challenge is that many acquirers lack the transaction-level visibility needed to identify where fees are being incurred and whether those costs are being fully recovered. Many acquirers still rely on aggregated reporting and complex reconciliation exercises involving manual processes to understand these costs.
The new study from SRM shows how this leads to under-recovered fees, revenue leakage and limited visibility regarding the genuine profitability of merchant accounts.
Early results already illustrate why visibility matters. For one mid-sized European acquirer, SRM and Torus, through its payments profitability intelligence platform, improved annual scheme fee recovery by €4 million – approximately 10% of its total scheme fee costs.
According to SRM and Torus, the answer lies in moving from aggregated reporting towards transaction-level profitability intelligence. This means being able to establish, at both transaction and merchant level:
- Actual transaction cost
- Scheme and interchange fees incurred
- Accuracy of costs recovered
- Accuracy of settlement reconciliation
- Actual areas of profitability
- Areas of revenue leakage
- Where pricing should be adapted
Thanks to this improved management information, leadership can make informed strategic and commercial decisions.
New solution makes tangible difference
The new SRM/Torus Acquirer Profitability Solution brings together SRM’s payments advisory expertise with Torus’ transaction-level payments profitability intelligence. It focuses on four areas where greater transparency can translate directly into fee recovery:
- Interchange and scheme fee assurance enables merchant-level calculation and recovery of interchange and scheme fees, helping identify under- or over-recovery and improve billing accuracy.
- Settlement reconciliation provides daily transaction-level reconciliation between schemes and merchant settlement files, greater visibility into variances, and stronger financial controls.
- Merchant profitability analytics provides daily profitability analysis across individual merchants, portfolios, and segments, giving management better information to support pricing and make commercial decisions.
- Daily estimate of interchange and scheme fees enables rapid reconciliation of merchant activity with scheme fees. Acquirers can now identify where fees are being incurred, which transaction types are being executed through each merchant, and the daily volume and value of scheme fees and interchange incurred by each merchant.
To explore the economics behind acquirer profitability in more detail, download the new SRM white paper, “Transforming Acquirer Profitability”, which examines the commercial pressures facing acquirers and the potential value that could be recovered through greater fee transparency and transaction-level insight.
