It’s no secret that merchant aggregators,firms that act as merchants-of-record for sub-merchants, haveexisted in the payments industry for a long time. After all, eBayhas been able to exist as the merchant-of-record for thousands ofsellers on the auction site for 15 years, and billions of dollarsof card-based payments fund PayPal accounts every year. With therise of mobile-card acceptance services such as LevelUp, Square,Intuit GoPayment, and Pay Anywhere, thousands of micro-merchantsand small businesses all process millions of transactions throughmobile devices linked to a single merchant account at each of thoseproviders.
Prepaid card programs that enable direct loads and reloads such asInComm or Stored Value Solutions are merchants-of-record ontransactions where the prepaid cardholder uses a bankcard of somekind to fund the load. Internet Payment Service Providers (IPSPs)such as Adyen, Global Collect, or Arvato Bertelsmann that managepayments connectivity, processing, and security for e-commercemerchants can utilize their gateway platforms to enablemulti-currency payment acceptance through a variety of acquirerrelationships.
Certainly, merchant aggregation firms that deal in the offlineworld have a long and growing presence in the payments market too,serving sub-merchants in categories as diverse as taxi drivers andbaby sitters. But official recognition of the PSP business modelthat serves non-e-commerce merchants and explicit sanction of itsexistence as an approved configuration for submitting card paymentsto the networks only came last year when Visa finally released itsguidance on Payment Service Providers.
Now it seems, since the aggregator model has this explicit sanctionwhere it didn’t have one before, more traditional merchant serviceproviders are looking at implementing merchant-of-record servicesmore broadly than ever before. The reasons for this includepotential cost savings on transaction processing and accountmaintenance, and relief of some of the associated operationalburden.
Acquirers have much to consider when exploring a shift in marketstrategy to incorporate a business line based on the merchantaggregator model. I’ll be publishing an expanded version of thispiece in the form of a Viewpoint for Mercator’s Credit AdvisoryService in the near term. In the meantime, I’d like to hear fromyou so we can discuss these considerations! Especially if you’reworking with an acquirer that might be using or studying themerchant-of-record model for aggregation of its portfolio in partor in whole. What’s on your list of pros and cons for this type ofmarket approach?