The Financial Impact of PCI Program Pricing in Merchant Acquiring
There are few things in the U.S. acquiring business about which one could say acquirers have a true consensus, but one of those tactical elements that has become essentially universal is the design and application of PCI program pricing. In our most recent research, some 87% of acquirers utilize a PCI compliance fee for their programs, which constitutes one of the highest incidences of a particular fee-type that we have measured in our industry. Acquirers are evenly split between monthly and annual fee structures, although the acquirers utilizing monthly fees tend to have a higher price point than those acquirers utilizing annual fees – $8 a month, on average, versus $72 per year (though with plenty of variation from acquirer to acquirer).
With 87% of acquirers using the fee with an average, effective price point of $84 a year and considering that acquirers reported they charge the fee to 80% of their small merchants, PCI compliance fees represent a cool 6% of industry revenue, assuming a count of small merchants in the neighborhood of 8 million. PCI non-compliance fees (which 73% of acquirers charge) and PCI insurance arrangements (which as many as 40% of acquirers offer) add to the total revenue that acquirers generate from their PCI programs.
The level of revenue generation from PCI programs accounts for upwards of 15% to 20% of fee income for most acquirers and adds on the order of 8 to 12 basis points to the net spreads of small merchant portfolios. Plus, PCI programs tend to be high margin considering the mark ups acquirers commonly apply to the costs assessed to them by their Qualified Security Assessors (“QSA”). To say PCI programs have been an important gear in small merchant acquirers’ earnings engine in recent years would be an understatement.
For more information, please contact Marc Abbey, Partner specializing in Merchant Acquiring,email@example.com
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