Scale Won’t Fix What Acquirers Can’t See

By John Berns, Managing Partner, SRM Europe

For the best part of a decade, the answer to thin margins in merchant acquiring has been to get bigger. Fiserv completed its $22 billion acquisition of First Data in 2019. In January 2026, Global Payments completed its $24.25 billion acquisition of Worldpay, creating a business that serves more than six million merchant locations and processes $3.7 trillion a year.

The logic makes sense. Scale spreads fixed costs and brings down the cost of each transaction. What it won’t tell you is what any individual merchant is worth, and putting two large merchant books together usually makes that granularity harder to see. You inherit more fee codes and another billing system, and all of it lands in the same monthly reports.

The question I’d put to any acquiring board, whatever its size, is whether it knows which of its merchants are making it money. Very few can answer that with any confidence.

The cost nobody calculates in real time

Alongside interchange, scheme fees make up the bulk of what an acquirer pays out, and they’re the one major cost most acquirers can’t calculate accurately at the moment a transaction happens. The economics of acquiring have fundamentally changed in the last few years, and scheme fees are a big reason why. There are now around 100 Visa fee codes and 150 Mastercard fee codes, applied by product, channel, and geography. The UK Payment Systems Regulator found core scheme and processing fees rose by more than 25% in real terms between 2017 and 2023. Pricing a merchant against that without transaction-level data is guesswork dressed up as a rate card.

Interchange++ was meant to make those costs transparent by passing them straight through to merchants. Plenty of billing platforms can’t cope with that level of detail, though, so some scheme fees end up in a single blended charge that gets reconciled against the scheme invoice once a month, in aggregate. That’s how a merchant with big volumes and a keen headline rate comes to look like a flagship account while its cross-border, card-not-present, and premium card transactions eat into margin.

My view is that most acquirers are losing margin on scheme fees every month, some knowingly and some not. Pricing is rarely the culprit. The data needed to control it just isn’t there when the decisions are being made.

How the data gap widens

For most acquirers I’ve worked with, the process behind this is surprisingly mundane. A scheme publishes a bulletin, and someone interprets it. The change then must be specified, coded, and tested before it reaches the billing engine. In the meantime, the acquirer has been paying the new fee without passing it on. At month-end, a small team tries to work out why the scheme invoice doesn’t match what merchants were billed.

That effort isn’t free. In a worked example of a European tier-one acquirer, we put the cost of managing scheme fees by hand at just under $1.9 million a year. That covers three full-time staff plus the platform changes needed to keep billing current and comes to about 0.7% of the $260 million total in scheme fees. Across the industry, we estimate automating that work could eliminate $1bn from acquirers’ internal costs over five years.

The bigger cost is what all that manual effort fails to catch. For the same mid-sized European acquirer, we found about €4 million a year in under-recovered scheme fees, roughly 10% of its total scheme fee bill. None of that was visible in its monthly reporting. Acquirers aren’t short of data either. Every transaction carries what’s needed to calculate its true cost. It just reaches the board as an aggregated monthly variance, by which point it’s too late to act on and too blunt to price from.

What changes when you can see every transaction

The shift that has mattered most in our work with payments profitability intelligence platform Torus is moving from monthly aggregates to daily, transaction-level calculation. Every scheme fee is recalculated and reconciled against the scheme’s own invoice, merchant by merchant.

Under-recovery shows up within days instead of at quarter end, which is the obvious win. The bigger one takes a few months to appear. Once you can see what each merchant costs, you can rank the book by contribution and consider repricing merchants that do not satisfy margin requirements. Clearer statements around fees to merchants also mean fewer disputes, and the operations team tends to notice that long before the board does.

None of this pressure is going away. The PSR have issued directions to Visa and Mastercard on fee transparency and pricing governance, and enterprise merchants are already going through their statements more carefully. By 2027 I expect a lot more of them will be seeking more detail and greater transparency around billing lines, and acquirers that are unable to provide this will be negotiating from a weak position.

Know the book before you buy the next one

None of this argues against consolidation. Scale still matters in acquiring. But an acquirer that doesn’t know its unit economics before a deal won’t know them after it, either. It will just own a bigger book it can’t truly see. Before the next acquisition or pricing round, a board ought to be able to name the merchants that are profitable vs the ones where its margins are being used to subsidise scheme fees.