Acquiring Opportunities in the Mid-Size Agent Bank Market

Navigator Edition: Merchant Acquiring Special Edition
By: Elizabeth Hooper

Over the past 12 years, only four of the twenty largest (by assets) U.S. agent banks have changed their acquiring partners. This trend may be attributed to the complex and bespoke specifications the largest banks and their customers require. Changing acquirers can be both labor-intensive and expensive for top-tier banks; as such, these banks tend to maintain a relationship with their incumbent acquiring partner who has become familiar with their requirements. Incumbent acquiring partners are, therefore, well-positioned to maintain a stronghold within this segment.

The acquiring market for banks outside of the top 20, however, has become increasingly competitive in recent years. Acquiring providers such as TransFirst, TSYS, and Vantiv are gaining share in agent banking by targeting mid-sized banks. Agent bank partnerships with mid-sized banks tend to be shorter in term, ranging between three and five years. With shorter-term contracts, mid-sized banks have the opportunity to come to market more often for acquiring partnerships. Mid-sized banks also typically have a lower cost of conversion, which makes them more likely to consider switching partners compared to the top 20 banks, who are often committed to longer and more complex contracts that would be time consuming and expensive to switch.

First Annapolis maintains a database of the top 200 agent bank partnerships. This research reveals that the agent bank market has increased in competitiveness over the past three to four years among acquirers focused on mid-sized financial institutions. Vantiv and TSYS have experienced the largest market share gains, though First Data, Elavon, and TransFirst continue to enjoy the leading market shares.

The mid-size agent bank market represents an increasingly significant opportunity for acquirers with agent bank strategies given the higher frequency of contract renewal and lower cost of conversion. Successful acquirers will develop strategies to identify potential bank targets coming to market and will establish competitive acquiring offerings to maintain current relationships and secure future opportunities.

For more information, please contact Elizabeth Hooper, Associate, specializing in Merchant Acquiring,

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