What’s Changing in Payments

When people talk about valuation, they usually focus on revenue, margin, and growth.

In payments, that’s not enough.

The buyers and capital allocators we work with — from North America to the Gulf, across Europe and LATAM — are looking deeper. They’re underwriting residual decay curves, mapping merchant churn, checking for high-risk MCC exposure, and adjusting price based on processor dependency, contract terms, and operational scalability.

If you're a founder, operator, or investor in merchant acquiring, payfacs, ISO platforms, or embedded infrastructure — here's what matters now in this market.

📉 Net Residual Trends

Residual revenue remains the anchor of value in payments transactions. Buyers want to see predictable, diversified, and sustainable net residual income over time.

Key Metrics:

• 3-year Net Residual CAGR – growth and consistency preferred over volatility

• Net vs. Gross Split – clarity on cost of servicing

• Monthly Decay Curve – buyers build discount factors based on this alone

Best Practices:

• Segment by merchant cohort (e.g., onboarding quarter)

• Adjust for seasonality or one-time adjustments

• Break out by processor (e.g., Fiserv, Elavon, local banks)

🧑‍💼 Channel Composition (Global Considerations)

Globally, channel structure plays a huge role in perceived stability:

International Note: In Europe and LATAM, many agents are technically contractors but treated with greater loyalty and embeddedness. Still, concentration risk (e.g., top 3 reps >40% of volume) gets flagged in diligence.

📊 Attrition Metrics

Merchant churn is often poorly understood and underreported — but it’s one of the first things we dissect.

What buyers want:

• 12- and 24-month retention curves, by onboarding cohort

• Attrition by channel and vertical

• Breakage rate (cancellations vs. downgrades vs. dormancy)

Target Benchmarks (Global):

• <15% annualized attrition = strong

• 15–20% = acceptable with mitigation strategy

• 20% = value haircut unless offset by exceptional growth

💳 Average Ticket Size & MCC Risk

Buyers price in risk based on merchant type — and average ticket size is often a proxy for both margin and volatility.

Best Practice: Classify your merchant base into MCC tiers (low/medium/high risk) and show proactive monitoring or reserve strategies.

💼 Residual Composition & Diversification

Residual concentration is a value limiter — especially in carve-out scenarios.

Checklist:

• Multiple processors? Good. Single-source (100% Fiserv)? Risk.

• ISO contracts with exclusive residuals? Higher flexibility.

• Buyout triggers or ROFR clauses? Flag for legal pre-work.

What we recommend:

• Diversify streams across at least 2–3 acquirer platforms

• Avoid more than 50% tied to a single partner or agreement

• Review and prepare to renegotiate ROFR and assignability clauses

⚙️ Technical Structuring: Details That Derail Deals

Structuring isn’t back-office work. It’s central to value realization.

Most common issues we flag:

• Aggressive first right of refusal (ROFR) clauses

• Contracts that are non-assignable or include anti-transfer language

• Exclusivity clauses with acquirers/processors

• Residual clawback provisions if merchants churn post-transaction

International nuance: In Europe and LATAM, exclusivity often appears buried in partner bank agreements, while ROFRs are less prevalent — but diligence expectations are tightening.

💰 Optimizing Capital Deployment: Strategic & Tactical

After a successful raise — especially with structured or non-dilutive capital — what you do next drives enterprise value.

Smart post-raise priorities:

• Agent consolidation to reclaim margin and stabilize distribution

• ISV partnerships to improve stickiness + LTV

• Automation upgrades (boarding, residual dashboards, underwriting)

Common mistakes:

• Over-investing in high-risk verticals for short-term topline

• Chasing new geos without local risk modeling or licensing clarity

• Ignoring FX cost in cross-border settlements

Pro tip: Build a capital allocation map with forecasted impact by metric (CAC, NRR, ARPU) and review quarterly.

💡 Technology That Moves Valuation

Tech is not an overlay. It’s a value multiplier — when it aligns with retention, scale, and cost efficiency.

Closing Thought: Valuation Isn’t Just Math — It’s Readiness

You don’t control the market. But you do control how prepared you are when it’s your turn at the table.

The best operators we work with — from Toronto to Dubai to São Paulo — are the ones who:

• Know their numbers before buyers ask

• Structure their contracts with the exit in mind

• Treat capital like a tool, not a trophy

• Understand that in payments, details drive multiples

If you're at a moment of inflection — looking to scale, restructure, sell, or raise — I’m happy to talk.

Because getting this right takes more than optimism. It takes precision.

—
Tom

Tom C. Schapira
Founder and CEO
Imagine Capital Group
E: [email protected]
Website http://www.imaginecapitalgroup.com

Securities Offered through Wellesley Hills Securities. Member FINRA/SIPC