Not to be left at the station, Citigroup is jumping aboard the train that’s hurtling down the payments landscape rails. Today the bank announced its plan to establish a merchant services unit to enable retailers to accept the expanding array of consumer payments.
While not a giant leap forward for the New York City global bank, given its already wide portfolio of financial services, this move is another example of payments players taking strategic action to counter disruptive forces swirling around the industry. See Mercator’s February, 2019, Viewpoint: Fiserv and First Data Proposed Merger Shakes U.S. Payments Ecosystem. This piece discussed how factors such as digital payments, e-commerce growth, and changing consumer shopping behavior have impacted the formerly staid and transactional world of merchant acquirers. Fintechs, developers, and gateway payment platforms are changing the value chain in how and where merchants accept customer payments. Barely two months after the Fiserv-First Data deal, FIS stepped up to target Worldpay. So Citi has now taken its own strategic action.
One interesting aspect of today’s developments is if the First Data-Citi merchant services joint venture will be affected. First Data previously stated that its JV relationships would not change as a result of its merger with Fiserv. We’ll be watching with interest to see how Citi’s merchant unit launch will unfold. One thing is certain—the payments landscape will continue to change. Just three months in and already some major deals and strategic moves. Expect more to come.
The referenced Wall Street Journal article from today is excerpted below:
Citigroup is starting a consumer-payments business, joining its biggest rivals and a host of financial-technology startups jockeying for position in the hottest corner of banking. The bank, already a dominant player in business-to-business payments, is launching a new unit that will offer big merchants a suite of consumer-payment options ranging from traditional credit cards to new digital wallets to direct bank-account transfers. The historically high-volume, low-margin business of connecting companies to customers, known in the industry as “merchant acquisition,” is heating up as digital wallets and other new payment methods proliferate.
“Digital payments are rapidly growing, and there’s a need for bank-grade technology,” Manish Kohli, Citigroup’s global head of payments and receivables, said in an interview with The Wall Street Journal.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group