In recent years, financial institutions have encountered numerous hurdles, including declining revenues from conventional services, advanced competition from fintech and tech firms, and a constant need to modernize outdated systems. This has led banks to explore alternative revenue sources to improve financial results, with one particularly promising area being online acquiring.
Online acquiring enables businesses to accept payments for goods and services through the internet, facilitated by acquiring banks or payment processors. This mechanism streamlines the process for merchants to handle credit and debit card transactions, enabling efficient online sales.
Historically, many banks moved away from providing online acquiring services mainly due to the high costs and complexity of developing their own payment systems. Conventional banks, reliant on legacy technology, struggled to adapt to the evolving demands of e-commerce, which often involved new system requirements. As specialized fintechs entered the market, banks found it challenging to justify the investments necessary to compete and subsequently shifted their focus back to core banking functions.
However, the landscape today presents another chance for banks to re-enter the online acquiring market. With e-commerce continuing to grow significantly, projected global online sales are expected to exceed $5.3 trillion by 2026. The advent of open banking also introduces novel transaction types like account-to-account payments and request-to-pay systems, growing at rates that outstrip traditional payment methods. This transformation in the digital commerce arena opens up fresh revenue possibilities.
Some prominent banks, like Barclays, have already made a successful return to online acquiring. For instance, through its Barclaycard merchant services, the bank recorded a 9% increase in acquiring volume in the third quarter of 2023 compared to the previous year. The focus on integrated digital solutions and APIs has enabled quicker payments and more efficient treasury operations, enhancing the e-commerce experience for businesses and attracting more merchants to their platform, ultimately increasing transaction volume and revenue.
Despite having the necessary resources, regulatory acumen, and industry knowledge, banks face stiff competition in the online acquiring sector. Established players like Adyen and Stripe, along with various nimble fintech firms, have gained significant market share by developing robust customer experiences.
To successfully reintegrate into the evolving online acquiring market, banks can pursue several strategies. Building an in-house payment gateway is one option, albeit a costly and time-consuming endeavor. Outsourcing to third-party acquiring specialists is another, but this could restrict a bank’s potential for market growth and profitability.
Another viable approach is collaborating with providers that offer acquiring-as-a-service (AQaaS). This method presents a variety of benefits, such as cost-efficiency, scalable solutions, faster market entry, regulatory compliance support, and seamless integration opportunities. Partnering with an AQaaS provider enables banks to leverage their longstanding merchant relationships while utilizing the technology expertise of specialized firms.
As the online acquiring sector grows, so do the potential advantages of re-entering it. Choosing the right partnership is critical for banks looking to develop new revenue streams and provide a comprehensive array of digital financial services.
However, speed is of the essence. The online acquiring market is shifting rapidly, and delays in strategy implementation could lead to missed opportunities, much like the hesitation experienced by some banks in the Buy-Now-Pay-Later domain. To carve out a presence in the burgeoning online acquiring space, financial institutions must quickly embrace a flexible, technology-driven approach.