The fastest-growing volume is the least profitable

Processing volume is growing fastest in the part of the business where the company is invisible to the customer. That is also where margins are thinnest, so headline growth and profit growth are pulling in different directions.

Mix is the story

Unbranded processing wins merchants on price and reliability. It is a good business at scale, and it is a commodity one: merchants can and do move volume to whoever charges least. Branded checkout is the opposite, a choice made by the customer that the merchant has to honour.

When the unbranded side grows faster, blended take rates fall even if nothing is going wrong. The question is whether the branded side is merely growing slower or actually shrinking.

What I'm watching

• Take rate, blended and, where disclosed, by segment
• Transaction margin dollars rather than volume
• Pricing concessions in large merchant renewals

Where I stand

Short, on a mix shift that the headline volume disguises. Growth that lowers the margin of the whole is not the growth it looks like.

What would change my mind

Transaction margin dollars growing alongside volume for several quarters. That would mean the mix shift is being absorbed, and my read of the dilution is too pessimistic.