Business Services Providers: Access to Potential Merchants and, Possibly, International Expansion
Several acquirers have merchant referral relationships with companies that have large bases of business customers, which we refer to as “business services providers.” These relationships provide a valuable referral stream as well as, potentially, an opportunity for international expansion. There are a number of such relationships in the market including Elavon and Costco, First Data and Sam’s Club, First Data and BJ’s Wholesale Club, Chase Paymentech and UPS, and Capital Bankcard and Staples. Such relationships provide acquirers with access to a large number of potential merchants. Costco, for example, notes it has 6.3 million business members. In many cases, referral relationships with business services providers also provides an opportunity for the acquirers to expand internationally. As shown in Figure 1, below, Elavon has a referral relationship with Costco in the United Kingdom and Canada in addition to the U.S. There is also a potential opportunity for Elavon to partner with Costco in Mexico and Puerto Rico. Elavon can leverage its relationship with Costco as a vehicle to enter international markets where it does not already have a presence, namely Japan, South Korea, Taiwan, and Australia.
While these referral relationships are generally very productive, finding an attractive business services provider partner can be difficult. There are many business services providers that at first review may seem like attractive partners, but there are a few underlying characteristics that viable partners generally possess: maintaining a loyalty or membership program, offering a large number of businesses in their customer bases, and demonstrating a track record of selling other third party products and services to their business customers. There are other companies in the market, such as FedEx, that also have these characteristics and are not currently in referral relationships with acquirers, suggesting that there may be opportunities in this market for acquirers. Of course, this is easier said than done. It may be difficult for acquirers to identify and structure mutually beneficial relationships with companies serving the business community, however, the advantages associated with referral relationships in this space continue to make business services providers attractive targets for many acquirers.
Figure 1: International Footprint for Elavon and Costco
Source: Elavon and Costco websites.
For more information, please contact Lacy McDonnell, Senior Consultant specializing in Merchant Acquiring, email@example.com
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