How The Battle For Merchant Acquisition Is Coming To Main Street

Forbes

18-07-2025

Fiona Roach Canning is the co-founder and CEO of Pollinate.
Recent years have seen America's banking system waking up to the true value of merchant acquiring.
This is a market forecast to hit $41.75 trillion globally by 2026. Despite this, banks have found themselves outflanked and losing market share to fintechs, processors and other nonbank financial institutions.
This is especially the case when it comes to providing merchant services to the more than 36 million small and midsized businesses (SMBs) that form the backbone of the U.S. economy. Fintechs and payment processors have made significant inroads with the U.S.'s SMBs, depriving banks not only of merchant services revenue but also of the ability to cross-sell deposit and lending services, which fintechs are increasingly offering themselves.
This represents a significant challenge for the banking sector, which is now drawing upon its considerable resources to fight back.
In recent years, for example, we have seen Bank of America (registration required) and Wells Fargo recalibrating their approaches to merchant services, with the cessation of joint ventures. Likewise, Huntington Bank has pivoted in its approach, too, and more will likely follow. These moves not only mean greater revenue share for the banks but also more customer primacy, meaning increased deposits and better lending decisions.
The U.S.'s corporate banks are recalibrating, but what about Main Street?
What about the many small and midsized banks across the U.S., serving local communities and businesses diligently, but which don't necessarily have the scale and budgets necessary to take the fight to the fintechs?
Merchant Acquiring Models
The examples above highlight a trend among larger, full-service banks toward greater ownership of merchant acquisition and the merchant journey.
For Main Street banks, however, buying out merchant acquisition partners isn't always an option. As it stands, most of America's Main Street banks operate a referral model when it comes to merchant services. These banks leverage their customer bases to act as a distribution channel for payment processors in return for revenue share and cross-selling opportunities.
In many ways, this model works well. It allows Main Street banks to offer their business customers, mostly drawn from America's 36 million-plus SMBs, integrated payments solutions with the overhead and management of associated costs and risks.
It also comes with some downsides, however, and as competition for merchant acquisition grows, these downsides may become ever more obvious.
Outsourcing merchant services, even to a valued partner, can lead to a complicated and disjointed customer journey and a loss of emphasis on the vital relationship between SMB and business bank. There is a range of other players competing for merchant services, too, and offering a smoother customer experience. Based on my company's proprietary analysis, Main Street penetration of merchant services among their own business customers is often as low as 3% and attrition as high as 20%.
At the other end of the banking market, it's for these reasons that Wall Street is rethinking its approach to merchant acquisition, but what options are available to Main Street?
Moore Bang For Your Buck
Moore's Law was originally designed to describe the decreasing cost of semiconductors over time.
Anybody who works in the tech sector, like I do, can't fail to notice this trend playing out across tech as a whole. In sectors from finance to software development, growing access to sophisticated tech tools is lowering traditional market barriers and allowing smaller and mid-market businesses to compete with their larger counterparts. And this competition will only speed up.
The recent launch of Truist Merchant Exchange is an example of this. (Full disclosure: My company has partnered with Truist.) Here we see a bank reclaiming the merchant relationship with a platform that offers SMBs the tools needed to make business easier.
Crucially, this platform also gives business customers the kind of experience that, following years of customer experience (CX)-focused fintech growth, they've come to expect. Whichever model banks choose when it comes to merchant acquisition—whether the referral model or a more bank-owned approach—a major stumbling block when facing digital-first fintech-driven merchant services has been CX.
The banking industry has long recognized its 'experience gap,' with some estimating that up to 20% of customer attrition can be attributed to poor CX. To paraphrase the great political insight, when it comes to winning back merchant acquisition, 'It's experience, stupid.'
Technological solutions, however, especially in merchant services, can help smooth the customer journey, create a more seamless experience and offer more opportunities for banks to own the customer relationship and the selling opportunities that come with it. This isn't just better for the customer but also can have a real impact on the bottom line. My company's own work in this space has seen an improvement in merchant growth of 15% year on year, double-digit upticks in monthly deposit balances and product adoption rates and customer relationships that last on average 10% longer.
Thankfully for Main Street, experience-driven platforms are putting great CX within reach and changing the dynamics in the competitive world of merchant acquisition.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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