While “mom and pops” may seem insignifi- cant compared to mega-retailers, their com- bined sales account for roughly half of all retail spending. Moreover, these businesses (there are roughly 25 million of them in the U.S.) generate an over-sized share of the re- tail and service industry’s new ideas and a major portion of innovation and growth.
Merchant payments services
In the U.S., small business acquiring has long been the profitable anchor in the indus- try, generating roughly two-thirds of indus- try revenues on one-fifth of the volume (Exhibit 1). Small business is a dynamic segment, increasingly competitive, and a must- win for any player in merchant acquiring.
Several trends are reshaping small business acquiring. In the post-crisis recovery, small business sales volumes have been sluggish. As larger firms grow their volumes, the mix for many acquirers will shift to lower-mar- gin segments and impact overall revenues. As small business recovers, however, this should provide a boost for acquirers. At the same time, pricing pressure in this segment is higher than ever. New entrants have pro- moted set pricing and stripped out fees, es- tablishing new reference points for many small businesses. The competition for this segment, therefore, will be rigorous.