In recent years, banks have confronted numerous obstacles, including shrinking revenues from conventional operations, escalating competition with fintech firms and technology behemoths, and the continuous challenge of updating outdated systems. These factors have compelled banks to explore alternative revenue avenues to strengthen their financial performance. One particularly promising area for revenue growth that had been neglected for some time is online acquiring.
Online acquiring refers to the process that enables businesses to accept payments online for goods and services, a process facilitated by acquiring banks or payment processors. This system empowers merchants by allowing them to efficiently process credit and debit card transactions, thus streamlining online sales.
Banks initially moved away from offering online acquiring services due to various challenges. Establishing and maintaining proprietary payment-acquiring systems proved to be costly and complex. Many banks relied on legacy systems that failed to adapt to the rapidly evolving demands of e-commerce, which necessitated new system specifications. As more specialized providers and fintech companies emerged, many banks found it increasingly difficult to justify the investments needed to sustain this aspect of their business, leading to a shift back toward focusing on their core banking services.
However, the online acquiring sector has again become attractive for banks in today’s market. E-commerce is experiencing consistent growth, with predictions that global online sales could exceed $5.3 trillion by 2026. Additionally, the introduction of open banking has facilitated new transaction types, including account-to-account payments. In certain areas, these advancements are outpacing traditional payment methods like cards and digital wallets, thereby presenting significant revenue prospects for financial institutions.
A number of major retail banks have already reinvested in online acquiring. As an example, one bank in the UK reported a 9% increase in acquiring volume in Q3 2023 compared to the previous year, following a successful strategy centered around merchant services. This institution has focused heavily on integrating digital solutions and APIs that enhance payment speed and streamline treasury operations, subsequently improving user experiences for e-commerce businesses. Increased transaction volumes directly correlate with growing revenues in their online acquiring sector.
Despite being well-positioned to exploit the online acquiring market—armed with financial resources, regulatory acumen, and established relationships with merchants—banks face significant competition from existing online acquirers and innovative fintech firms. These competitors have crafted their businesses around providing seamless customer experiences, which has granted them a considerable market share.
As banks look to make their entrance into, or re-establish themselves in, this refined online acquiring arena, they have various strategies at their disposal. One approach could involve developing an in-house payment gateway from scratch, though this can be costly and time-intensive. Outsourcing to a third-party service is another possibility, but it may restrict a bank’s ability to expand its market share and profitability.
A more advantageous route could be to collaborate with providers offering acquiring-as-a-service (AQaaS) solutions. This strategy lays out a range of benefits, including cost-efficiency, scalability, faster market entry, regulatory compliance support, and the ability to seamlessly integrate additional services. Partnering with AQaaS firms empowers banks to take advantage of online acquiring possibilities while preserving control over relationships with merchants. It allows banks to leverage their established trustworthiness while utilizing the technological edge of specialized partners.
The advantages of embracing a return to online acquiring are considerable, but selecting the appropriate strategy is paramount. Partnering with an AQaaS provider can enable banks to not only create new revenue streams but also present merchants with a holistic suite of digital financial services effectively.
However, timing is critical. The online acquiring landscape is transforming swiftly, and any delays could result in missed opportunities, akin to the situation many banks encountered in the Buy-Now-Pay-Later sector. To successfully capture a share of the burgeoning online acquiring market, banks must adopt agile, technology-driven strategies without hesitation. The renewed focus on online acquiring represents a pivotal shift, offering the potential for revitalized revenue as e-commerce continues its upward trajectory.