Jan 18, 2006

Key success factor #2: Achieve cardholder critical mass very quickly, merchants will follow

(This is the third post in a series on key success factors and common mistakes.)

An enhanced payment experience makes it much easier to recruit new merchants. Akbank launched several years before they were required to migrate to EMV, even if they didn’t have a fraud problem. From 2002 to 2004, they multiplied their cardholder base by 2.5 times and their merchant base by 7 times. Something very interesting happened in 2003. You can see that they achieved cardholder critical mass, which caused their merchant base to explode. Scale is a feature. If you have a large cardholder base, your enhanced payment service will become irresistible to merchants.


Mashreqbank also launched before they were required to, again not because they had a fraud problem, but because they needed to fight commoditization. They launched January 2004 and immediately achieved fast results. They grew their cardholder base by 65% in one year, and their merchant base by 25%. They were already the leading acquirer in the UAE, with almost 50% market share, but were under strong price pressure from competitors. We understand that today, there is far less pressure on price, and in some situations they are actually able to increase their fees.


Merchants want to offer a superior shopping experience to as many customers as possible. If they can access a large cardholder base, they will want to accept the card and enhance the customer’s payment experience with surprise gifts, promotions, VIP services, etc. This creates strong demand for a bank’s merchant acquiring activities. Acquirers can recruit merchants easier and can avoid competing primarily on price.

Prior posts:
5 key factors for success (and 7 common but critical mistakes)
Key success factor #1: Focus on enhancing the payment experience

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