Did Barclaycard just knock a £47m hole in the UK merchant acquiring market?

Barclaycard is the UK’s leading credit card provider. Recently, it began moving its business from Mastercard to American Express. Because Amex isn’t accepted everywhere, customers have also been sent a Visa card.

You get 1% cashback on the Amex but only 0.5% on the Visa card. This means that customers have a strong incentive to use the Amex. I know because I’m one of them. Looking at my statements, I can see that roughly 75% of my Barclaycard spending is on the Amex.

This shift is actually pretty important for the UK’s merchant acquirers. They make good money on processing Mastercard transactions but (usually) nothing at all on Amex. The numbers actually look quite scary when you work them through. If I’ve got something wrong, please shout.

2013

Total sales on UK credit cards                         £159.6b (UK Cards)

Barclaycard share of credit sales                    13% (C&MR Research)

Barclaycard credit sales                                       £20.7b

% of transactions moving to Amex               75%

Value of transactions moving to Amex      £15.6b

Typical credit net acquiring margin              0.3%

Lost margin to UK acquirers                             £47m

Acquiring is a high fixed cost, low marginal cost business. This means that the £47m will drop pretty much straight to the bottom line.

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