Analysing the future of South Africa’s card acquiring market

The acquiring landscape in South Africa has significantly evolved over the past few years with the introduction of new technologies and innovative offerings by new players in the market. This evolution has changed the way businesses and merchants interact with customers by making faster, more convenient transactions that improve the customer’s journey.

Electronic payments provide an important social benefit because the cost of cash in South Africa – about R23 billion - imposes a significant cost on society. Therefore, exploring ways in which our client can capture the cash market through new acceptance technologies will help alleviate this cost of cash in South Africa.

Due to innovation in the acquiring market changing rapidly, and competition increasing, our client wanted to better understand the market to engage new partners and increase their market share. This required a strategy and go-to-market approach across the various acquiring channels.

To scope the acquiring landscape in South Africa, we determined the spending patterns of households by analysing personal-to-business (P2B) expenditure in each sector of the economy. This was compared with the profitability of merchants in each sector by analysing the net profit margins of key merchants. This allowed us to identify the sector with the best opportunities for acquiring.

Similarly, we determined the spending patterns of businesses by analysing business-to-business (B2B) expenditure in each sector of the economy. Business spending by business size was calculated in order to determine which type of business would benefit from card acquiring methods.

To understand what other acquirers were doing in the market, we conducted a competitor review of the acquiring banks and independent acquirers in the market. We unpacked the offerings of the different acquirers by channel type, i.e. POS, MPOS, QR, App and eCommerce. By analysing the value proposition and customer experience of each product, we identified key pain points that customers and merchants faced with different acquiring channels. This informed our recommendations on how the client could improve future acquiring channels.

Given the findings from the P2B expenditure analysis, Genesis identified profitable sectors with either modest or high cardable opportunities and recommend the suitable point of interaction (i.e. POS, mPOS, QR, App and eCommerce) for each sector across business types.

Similarly, Genesis also identified B2B cardable opportunities within growing sectors and recommended the point of interaction for each sector across business types, based on average transaction value and transaction volume estimates. The competitor review revealed that acquiring banks faced stiff competition as independent service providers continued to gain market share.

Based on the comparative analysis between acquiring banks, the client is well-placed in the market and scored well in its offerings across all the points of interactions. The analysis and recommendations were presented to the client and shaped its acquiring strategy in South Africa.