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The Strawhecker Group The Strawhecker Group http://www.marketresearch.com/Strawhecker‐Group‐v3860/ Publisher Sample Phone: 800.298.5699 (US) or +1.240.747.3093 or +1.240.747.3093 (Int'l) Hours: Monday - Thursday: 5:30am - 6:30pm EST Fridays: 5:30am - 5:30pm EST Email: [email protected] MarketResearch.com Directory of U.S. Merchant Acquirers The information in this report is based upon information we consider reliable, but its accuracy and completeness cannot be guaranteed. It is shared for educational purposes only. The sources of this information includes publically available or published information from company websites, surveys completed by the companies, TSG insights and reports, and The Nilson Report. Confidential. For discussion purposes only. www.TheStrawGroup.com / www.PaymentsPulse.com © Copyright 2012. The Strawhecker Group. All Rights Reserved. Merchant Acquirer Definition For the purposes of this report, a merchant acquirer is an entity that solicits merchants on behalf of an Acquiring Bank for payment card acceptance and enables card payments from customers. An Acquirer generally holds responsibility for providing customer service, merchant-level support, merchant-level compliance with Association rules, and underwriting of merchant accounts. Resource Links General ISO Resources: • Visa Global Registry of Service Providers Including Merchant ISOs • List of Validated Payment Applications Retention and Alternative Revenue ISO Partners: • National Benefits Programs • Royal Group Insurance TSG Resources: • Acquisition Multiples Distribution & TSG Merchant Database Attrition Summary • Merchant Aggregation Information • Case Study: Driving Value Through Competitive Bidding Confidential. For discussion purposes only. © Copyright 2012. The Strawhecker Group. All Rights Reserved. 2 2 Top 10 Acquirers: Historical Data Top 10 US Acquirers – Market share (1988 – 2007) Top 10 US Acquirers – Market share: The following chart details the Top 10 US merchant acquirers and the top 50 acquirers total market share from 1988 to 2007. As the data in the below charts show the market shares of the top acquirers, specifically the top 10, has fluctuated widely. In 1988 the market was highly fragmented with the top 10 controlling only 39% of total volume. This number jumped to 67% in 1997 as the top 10 aggressively gained market share to build scale in their businesses. Beginning in 2006 the top 10 acquires began to lose market share as the industry’s lucrative characteristics attracted an increased amount of competition from smaller regional ISOs and banks. 1988 1997 2006 2007 Company Volume Share Company Volume Share Company Volume Share Company Volume Share ($M’s) % ($M’s) % ($M’s) % ($M’s) % National Processing Co. 21,093 8.5 Chase Manhattan* 94,943 15.5 Chase Payment Sol. 563,669 27.9 Chase Payment Sol. 599,375 26.5 NaBanco (NB) 14,936 6.0 National Processing Co. 74,809 12.2 BA Merchant Services 283,259 14.0 First Data 353,514 15.6 Citibank 14,805 6.0 First Data Corp (NB) 64,711 10.6 First Data 269,793 13.4 BA Merchant Services 279,873 12.4 Bank of America 9,433 3.8 Paymentech (NB) 46,223 7.6 NOVA Info. Sys. 155,970 7.7 NOVA Info. Sys. 171,994 7.6 National Data Corp. (NB) 7,861 3.2 BA Merchant Services 29,080 4.8 Fifth Third 136,681 6.8 Fifth Third 154,866 6.9 Citizens Fidelity 7,730 3.1 National Data Corp. (NB) 22,915 3.8 Wells Fargo 77,845 3.9 Wells Fargo 86,433 3.8 Security Pacific Nat’l 6,289 2.5 Fifth Third Bank 21,417 3.5 Global Payments 67,913 3.4 Global Payments 83,151 3.7 First Interstate Bancard 5,765 2.3 U.S. Bancorp 20,104 3.3 Heartland Payments 43,336 2.2 Heartland Payments 51,935 2.3 Wells Fargo 5,241 2.1 First of Omaha 16,902 2.8 First National Merch. Sol. 38,364 1.9 First National Merch. Sol. 46,669 2.1 Banc One 3,878 1.6 Banc One* 16,520 2.7 RBS Lynk 27,836 1.4 RBS Lynk 34,005 1.5 Top 10 Acquirers 161,134 39% Top 10 Acquirers 407,624 66.7% Top 10 Acquirers 1,664,666 82.5% Top 10 Acquirers 1,861,733 82.3% Top 50 Acquirers 161,134 64.8% Top 50 Acquirers 594,662 97.3% Top 50 Acquirers 1,985,234 98.4% Top 50 Acquirers 2,204,080 97.5% All Bankcards 248,796 100% All Bankcards 611,039 100% All Bankcards 2,016,793 100% All Bankcards 2,261,652 100% •Individual market shares may not sum to Top 10 totals due to rounding Confidential. For discussion purposes only. © Copyright 2012. The Strawhecker Group. All Rights Reserved. 3 Top 10 Acquirers: Historical Data Top 10 US Acquirers – Market share (2008 – 2011) Top 10 US Acquirers – Market share: The following chart details the Top 10 US merchant acquirers and the top 50 acquirers total market share from 2008 to 2011. The data from 2008 to 2011 shows market consolidation amongst the largest acquirers in the industry. From 2007 to 2011 the drop in Top 10 market share results from smaller acquirers gaining ground as these companies have seen recent success in establishing some foothold in the industry. This has been accomplished by utilizing the vehicle of technology driven payments solutions and by specializing in specific vertical markets, often via strategic partnerships with non-payments companies. 2008 2009 2010 2011 Company Volume Share Company Volume Share Company Volume Share Company Volume Share ($M’s) % ($M’s) % ($M’s) % ($M’s) % Chase Payment Sol. 566,899 23.8 BA Merchant Services 457,729 19.3 BA Merchant Services 472,989 18.3 BA Merchant Services 489,059 17.2% First Data 293,175 12.3 First Data 389,801 16.4 First Data 402,000 15.5 First Data 408,588 14.4% BA Merchant Services 283,086 11.8 Chase Payment Sol. 294,592 12.4 Chase Paymentech Sol. 336,310 13.0 Chase Paymentech Sol. 398,083 14.0% Elavon (previously NOVA) 181,065 7.6 Elavon 171,361 7.2 Fifth Third 197,643 7.6 Vantiv (Fifth Third) 218,370 7.7% Fifth Third 164,912 6.9 Fifth Third 159,420 6.7 Elavon 182,676 7.1 Elavon 195,410 6.9% Citi Merchant Services 102,818 4.3 Citi Merchant Services 106,288 4.5 Citi Merchant Services 121,,570 4.7 Citi Merchant Services 142,185 5.0% Global Payments 92,679 3.9 Global Payments 97,803 4.1 Global Payments 109,042 4.2 Global Payments 120,588 4.3% Wells Fargo 90,841 3.8 Wells Fargo 93,868 3.9 Wells Fargo 105,518 4.1 Wells Fargo 120,439 4.2% Heartland Payments 74,684 3.1 Heartland Payments 67,772 2.9 Heartland Payments 71,603 2.8 Heartland Payments 79,446 2.8% First National Merchant 51,384 2.2 First National Merchant 60,558 2.6 TSYS Merchant Solutions 67,408 2.6 TSYS Merchant Solutions 75,150 2.6% Solutions Solutions Top 10 Acquirers 1,902,547 79.7% Top 10 Acquirers 1,899,192 79.9% Top 10 Acquirers 2,066,757 79.8% Top 10 Acquirers 2,247,316 79.2% Top 50 Acquirers 2,323,874 97.7% Top 50 Acquirers 2,335,730 98.2% Top 50 Acquirers 2,541,417 98.1 Top 50 Acquirers 2,775,938 97.9% All Bankcards 2,379,846 100% All Bankcards 2,377,741 100% All Bankcards 2,589,595 100% All Bankcards 2,836,417 100% •Individual market shares may not sum to Top 10 totals due to rounding Confidential. For discussion purposes only. © Copyright 2012. The Strawhecker Group. All Rights Reserved. 4 Industry Highlights Directory Breakdown of Sponsor Banks: Number of Relationships Estimated/As Available; Does Not Total 200 as Multiple Acquirers Have Multiple Bank Sponsors 80 43 31 21 17 14 10 11 9 9 8 Wells Fargo Chase HSBC US Bank Merrick Bank FNBO Synovus Deutsche Harris Self Other Sponsored Confidential. For discussion purposes only. © Copyright 2012. The Strawhecker Group. All Rights Reserved. 5 5 Industry Highlights Directory Breakdown of Front-end and Back-end Processors Estimated/As Available Number of Front-end Processing Relationships Number of Back-end Processing Relationships 93 94 70 62 53 42 32 28 20 16 First Data TSYS Global In-House Other First Data TSYS Global In-House Other Payments Payments Note: does not total 200 as multiple Acquirers have multiple processors Confidential. For discussion purposes only. © Copyright 2012. The Strawhecker Group. All Rights Reserved. 6 6 Company Overviews PORTFOLIO STATISTICS STRUCTURE Bank Card (V/MC) Dollar Volume • Public (NYSE:BAC) ($ Millions) • Bank of America Merchant Services is approximately 48.5% owned by First Data, through $489,059 COMPANY VITALS joint venture, 5% owned by Rockmount $472,989 Directory Dollar Volume Rank: #1 Investments LLC, and the remaining 46.5% is Location: Atlanta, GA $457,729 controlled by Bank of America. Founded: 2009 Front-end Processor: TSYS & In-House Network RECENT ANNOUNCEMENTS Back-end Processor: TSYS & In-House, First Data 2009 2010 2011 Sponsor Bank: Bank of America, N.A. CAGR: 3.4% • Press Releases Website: www.merch.bankofamerica.com BUSINESS OVERVIEW Bank Card (V/MC) Transactions • A unit of Bank of America, Bank of America (Millions) Merchant Services is the number one rated U.S. payments processor 9,577 • BofA Merchant Services handles more than nine 9,261 ADDITIONAL DETAILS 8,908 billion Bank Card transactions annually Vertical Specializations • BofA Merchant Services focuses on verticals • Large Retail including retailers, restaurants, services with tip • Airlines (taxi/limo, salons), internet/ecommerce, lodging, 2009 2010 2011 • Government trade services, and mail/phone order CAGR: 3.7% • Restaurants/Hotels KEY MANAGEMENT Active Merchant Outlets Tom Bell, CEO (Thousands) JoAnn P.
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