Over the past years, banks have faced many challenges – from
declining revenues from traditional business lines and intensifying competition
from fintech and tech giants to the never-ending struggle to modernise legacy
infrastructures. Banks are pushed to seek new revenue streams to bolster their
bottom lines. And there’s one area that they’ve long abandoned but that now
looks especially promising for boosting revenues: online acquiring.

Fintech Competition Drives Banks from Online Acquiring

Online acquiring is the process through which businesses
accept payments for goods and services online, facilitated by acquiring banks
or payment processors. This system allows merchants to process credit and debit
card transactions, enabling them to sell products online efficiently.

There were several reasons why banks began to withdraw from
offering online acquiring services. For one, it was costly and complex for them
to establish and maintain their own payment-acquiring systems.

Banks relying on
legacy systems just couldn’t keep pace with the rapidly changing e-commerce
demands, which came with new system requirements. As specialised providers and
fintech companies emerged, banks found it increasingly difficult to justify the
investment required to maintain this business. So, they chose to drop online
acquiring and focus on core banking services.

Returning to Online Acquiring: A Strategic Move

Nowadays, the online acquiring market presents an attractive
revenue opportunity for banks again. E-commerce sales are steadily growing,
taking an increasing share of the sales pie. Globally, online sales are
estimated to surpass $5.3 trillion in 2026. Moreover, open banking has
triggered new transaction types, such as account-to-account payments and
request-to-pay systems.

In some regions, these innovations are growing at a
faster rate than traditional payment methods like cards or digital wallets. This
rapidly expanding digital commerce landscape poses new revenue opportunities
for banks.

Some major retail banks, such as Barclays in the UK, have
already returned to online acquiring. This strategy has proven successful,
particularly through its Barclaycard merchant services – in Q3 2023,
Barclaycard UK saw a 9% increase in acquiring volume compared to 2022.

It’s also worth mentioning that Barclays has recently placed
great focus on integrated digital solutions and APIs that enable quicker
payments and streamlined treasury operations. This further improves e-commerce
experiences for businesses, allowing Barclays to attract more merchants to
their platform. This, in turn, leads to increased transaction volume and higher
revenue for their online acquiring business.

Fierce Competition Challenges Banks in Online Acquiring

Banks are well-positioned to capitalise on online acquiring.
They have the necessary financial resources, regulatory expertise, and
technical knowledge to succeed. No less important – banks have long-standing
relationships with merchants and enjoy a high level of trust from both
businesses and consumers.

Then, there’s the “but.”

The online acquiring market has changed and evolved since
banks left this space. Today, banks face stiff competition from established
online acquiring companies (think Adyen or Stripe), as well as smaller
fintechs. These competitors have built their businesses around seamless
customer experiences, which has allowed them to capture significant market
share.

So, now what?

How to Catch a Moving Train

Banks have to find a way to enter or re-enter the highly
developed online acquiring market. And there are a number of options to do it.

They can build an in-house gateway from scratch. But that’s
an expensive and time-consuming process many may not have the luxury to pursue.
Alternatively, they can outsource to a third-party online acquiring specialist.
However, that significantly limits a bank’s ability to grow market share and
profitability in this sector.

New data reveals banks aren’t buying fintechs:

– <1% of fintech acquisitions by banks (2013-2023)
– Only 13% of deals over $300M
– Cultural mismatches hinder success
– Banks prefer services over ownership.

Bad news for fintechs seeking bailouts.#FinTech #BankingTrends… pic.twitter.com/hFPGGnfWxs

— Cyprx Research Lab Official (@CyprxResearch) January 9, 2025

Finally, there’s an option to partner with a white-labelled
acquiring solution delivered as a service (SaaS). This approach offers several
advantages, including cost-effectiveness, scalability, faster time-to-market,
regulatory compliance support, seamless integration, and opportunities for
additional services.

Partnering with acquiring-as-a-service (AQaaS) solutions
allows banks to capitalise on the online acquiring opportunity while
maintaining control of their merchant relationships. This way, they’re in
charge of leveraging their brand trust while benefiting from the technological
expertise of specialised providers.

Don’t Be Late to the Party

The potential benefits of returning to online acquiring are
substantial. But it’s crucial to choose the right strategy. An AQaaS partner
can help banks create new revenue streams and offer merchants a comprehensive
suite of digital financial services – in an effective and seamless way.

However, banks must move quickly. The online acquiring
market is evolving rapidly, and those who hesitate may find themselves left
behind – much as many banks did in the Buy-Now-Pay-Later market. To secure a
share of the growing online acquiring market, banks shouldn’t wait to embrace
this agile, tech-centric strategy.