Research shows that the global merchant-acquiring market volume will reach $41.75 trillion by 2026.
There are various factors contributing to its growth.
- Massive demand for new payment solutions and integrations in eCommerce
- Expectations from acquirers to offer data-driven digital banking services and other perks like competitive fees, eCommerce integrations, mobile payments, and a user-friendly interface
- Disruption in payment and banking sectors and increased focus on empowering small merchants with options like revamping credit cards and payment products
- Consolidation in the merchant acquisition industry. For example, large players like MasterCard and Visa invested in fintech firms like Klarna, Stripe, and Transfast to provide secure and efficient payment processing options to merchants
- SME digitization provides SMEs with modern payment capabilities like cross-border and omnichannel payments, and other features like self-service portals for account management, reporting, and data analytics
With the merchant-acquiring market growing steadily, let’s look at the trends that will likely dominate the headlines in 2023.
Trends To Watch Out For In Merchant Acquiring
- AI-based Merchant Acquiring Services: Acquirers have started using artificial intelligence (AI) to monitor merchants and offer them a range of products and services that are different from competitors. According to Pymnts research, 94% of banks use AI for this purpose. Additionally, 90% of banks use AI to improve operational efficiency. Other reasons for incorporating AI include – identifying barriers to profitability, frauds, low transaction volume, and short stays by merchants, and fixing them to improve the bottom line.
- Integrated Payments: Integrated payments are growing popular among customers. 23% of customers are willing to delete their mobile banking app and embrace payment options that consolidate all payment information in one place. With APIs becoming cheaper and more accessible, merchants have started offering Banking-as-a-Service (BaaS) to customers to win customer loyalty and generate a new revenue stream.
- Rise In Embedded Finance: Merchants are turning into banks with embedded finance. A subset of BaaS, merchants use embedded finance to provide payment, lending, and saving services to customers. For example, customers can directly pay bills or redeem reward points using Amazon’s card. Like integrated payments, embedded finance is a win-win for both customers and merchants. Merchants can engage with customers and deepen their relationships through such value-add services, and customers can enjoy the seamless experience of shopping and managing finance at the same time. Acquirers must understand the potential of embedded finance and collaborate with fintech companies to offer such co-brand solutions to merchants. It will help the acquirers expand their reach.
- Rapid Merchant Payments: Typically, it takes a lot of time for merchants to get access to funds from a customer’s cards. The slow processing does not meet the merchant’s expectation of next-day fund access. Merchants want quick access to their money. This presents acquirers with a unique opportunity to deliver solutions that provide merchants with fast fund access.
- Cryptocurrency Becomes Mainstream: As more customers accept cryptocurrency payments, merchants have started adopting cryptocurrencies as a payment option to provide additional payment options to customers, become more crypto-friendly, improve engagement, and generate more revenue. According to Deloitte’s survey, 75% of retailers plan to accept cryptocurrency as payment in the next two years. 83% of retailers have already invested $1 million to create an infrastructure to accept digital payments.
How To Leverage the Trends to Grow Business?
Every year, acquirers lose over $2 billion due to merchant attrition. There are various reasons for merchants switching their providers. It could range from dissatisfaction with how the acquirers handled their grievances, to high costs, and better solutions from competitors. There are also merchant challenges, such as increasing instances of ‘Card-Not-Present’ frauds that have led to merchants losing $40 billion each year. The only way to stop merchant attrition is to provide differentiated services, quick resolutions to their problems, and use advanced security solutions like 3D Secure protocol, two-factor authorization, machine learning, and biometrics to prevent fraud on time.
To address these challenges, acquirers must modernize their payment systems, augment ancillary services, and ensure that the technology operations don’t skyrocket.
At Verinite, we provide end-to-end services, such as consultation, automation, digitalization, application development and maintenance, and testing to help acquirers keep pace with merchant demands.
To know more about how our third-party payment solution can help grow your business, contact us.
Debasis heads the delivery for all client engagements at Verinite. He has a long track record of delivering high quality, responsive, secure and cost-effective business and technology solutions in BFSI domain. Outside his work, he is an amateur animator, a sports enthusiast, a voracious reader and a Trivia buff.