August 10th 2018
Multiple processor relationships: are they worth it?
Having multiple processors involved in your card processing arrangements, while complex, is something all merchants should actively consider. Merchants with complex payment environments such as those handling multiple currencies, transaction types, and business channels, may find benefits in partnering with more than one processor to achieve optimization throughout the supply chain.
The points below should be carefully considered by all merchants looking to introduce multiple processors into their arrangements.
Potential Benefits
1. Using multiple processors has been proven to provide benefits on a domestic level as merchants look for the best-in-class processors to drive performance levels in all avenues of card acceptance. The variables in the supply chain often include multiple card networks (Visa, Mastercard, Star, etc.), multiple card types (debit, credit, prepaid etc), multiple card verification methods (EMV, magnetic stripe, mobile, contactless, etc.), card present vs card not present environments, processor/issuer relationships, and multiple payment types (recurring payment, bill pay, etc.). For merchants that operate on the international level, there are additional variables to consider as well such as the need for local processing to benefit from regulation, processing multiple currencies, needing a best-in-class DCC solution, and processors with in-market experience of BIN authorization for regions a merchant may operate in. Utilizing multiple processors often allows a merchant to have the optimal arrangements for each of their variables.
2. Having multiple players in the processing market allows merchants to develop internal scorecards. These scorecards are weighted based on KPIs and cost, and can be used to compare processors. Additionally, by using these scorecards a merchant can determine the necessary setup for dynamic volume switching to the best processor.
3. The risk of encountering downtime or a connectivity issues with a processor should have a lessened impact when multiple processors are used. The transaction volume typically given to one processor experiencing issues can be spread out over multiple processors, ensuring continued operations.
Potential Challenges
1. It is likely that only large merchants would be able to maximize the benefit of using multiple processors. Large merchants would have the volume necessary to negotiate competitive terms with multiple processors and have the capability to run a dedicated team managing relations, contracts, and reconcile data across multiple processors.
2. Having multiple processors will likely add complexity to the merchant’s processing. A merchant’s POS or online environment would need to be certified for each processor chosen. Typically, this certification process is seen as labor-intensive. If a merchant makes use of a third-party gateway, they would need to have similar functionality with the chosen processors.
3. Without exclusivity provisions in a merchant contract, processors may be less inclined to bid competitively.
In Summary
Many large merchants have held multiple processor relationships in place for a number of years, but as payment environments increase in complexity for all retailers, businesses may want to consider exploring alternative arrangements. The benefit of using multiple processors covers access to market-leading service for merchant payment environments (with respect to acceptance and cost), and covers the need for contingency.
As we noted above, not all merchants may be able to take advantage of the opportunity, as it may not be commercially viable. Merchants should carefully consider both the potential benefits and potential challenges when exploring the business case for multiple processor relationships.