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Forbes
5 days ago
- Business
- Forbes
How Software Vendor-Bank Competition Could Give Way To Collaboration
Fiona Roach Canning is the co-founder and CEO of Pollinate. For banks, the growth of embedded finance in recent years has been cause of both celebration and anxiety. The good news is that, by embedding banking products within a growing range of independent software vendors (ISVs) in sectors from gardening to dentistry, banks find a convenient front end for their products in market niches that a bank on its own—as a consequence of scale—would struggle to reach. For a bank to build its own proposition specifically for landscape gardeners, for example, wouldn't be cost effective and would likely require industry specific knowledge a bank doesn't have. Embedding financial products within ISVs such as Real Green for example, focused on serving that market, is a shortcut to advanced segmentation. The potential downside is the fear that banks become simply white label product providers to increasingly sophisticated ISVs and a tech ecosystem. Is there another way to think about this however? One based on collaboration rather than competition—and with embedded ISVs as well as embedded finance? Winner takes all? Competition after all comes with its downsides. While ISVs offering embedded financial products can offer customers convenience and experience, they have no control over the terms of the finance products they offer. Banks can absorb macroeconomic events—for example, a base rate move. For a specialized ISV with a relatively small customer base, however, events like this pose a significant challenge. Banks looking to demonstrate segmentation meanwhile have historically used cosmetic changes (text and images rather than products and propositions). More recently, some have attempted to offer links to more specialized software; however, this has resulted in customer experience (CX) feeling disjointed, riddled with multiple sign-up screens and lacking the kind of integrated data that business customers need. But more than this the competition model is rooted in the mistaken assumption that banks and ISVs are competing to sell comparable products to SMBs. In reality, while ISVs and banks might serve the same customers, they're selling very different products. Where banks offer the financial services SMBs need to grow, ISVs offer the segmentation, experience and CX that make business easier. Collaborating can bring these elements together into a single, much improved product to the benefit of banks, ISVs and—most importantly—business customers. If banks and ISVs can agree that it's not about 100% customer ownership, and more about who is the primary relationship for what, then perhaps this can be achieved. Beyond Payments Offering payments is a natural extension to the scheduling, booking, employee management and other functionality that ISVs are built around. Not only does this embedded finance make an ISV a more attractive proposition for end customers, it also significantly improves their revenue per customer. As an example of this in action, Toast now gets almost 82% of revenue from financial services, and only 18% from their subscription services and hardware. It follows from this that the greater the range of financial services an ISV can embed, the greater the range of business models and services it can offer. From credit or staggered payments, banking partnerships have the potential to open up new business possibilities. An ISV such as Dentally, for example, could potentially offer clients a way of paying for expensive dental procedures in installments, opening a greater range of products to a greater range of customers. Banking partnerships can also give an ISV access to a large number of potential customers within the bank, representing a huge business opportunity. With the regulatory landscape in the U.S. seemingly shifting in a direction that will make the case for closer bank partnerships even stronger, could we also see a trend of fully embedded ISVs within banks? Embedded ISVs? The rationale for closer banking partnerships and embedded ISVs is clear, so what's holding the market back? Part of the answer here is that the ISV market is in its infancy. While there are some large and established ISVs, it is not yet clear who will be around in five years' time. The same is not true of banks. Alongside this, there are more industry verticals than there are financial services products. As such, it's easier to embed acquiring and lending but harder to embed the specialized software for the myriad industry segments a bank serves. Take a loan: While the process of assessing credit worthiness will differ, the actual loan product is no different for a dentist to a restaurant. The same is not true of business management software. For partnership to truly work, too, an equilibrium needs to be found between the needs of ISVs and those of the banks. If ISVs want to move into offering their own financial services, then there's no need for partnership. However, if seamless two-way traffic between the two can be created, SMBs could actually benefit—accessing essentially the same service no matter which entry point (bank first or ISV first) that they choose to take. Then the case for partnership becomes much clearer. As noted by Deloitte recently, regulatory changes could result in some nonbank financial companies (NBFCs) to exit the market. More ambitious ones may apply for banking licenses. This is no easy task, and existing banks have a huge advantage here in that they are well-established in the banking sector, often with hundreds of years' experience behind them. Those digitally native NBFCs that do secure a banking license, however, and that have grown up on CX and segmentation, could prove to be formidable competition in years to come. No doubt we'll see some of these businesses emerge from the world of embedded finance. By turning the tables, however, and embedding ISVs within their own product suites, rather than the other way around, banks have a time limited opportunity to beat the competition in the race to bring together the best of banking and the best of CX. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
Forbes
18-07-2025
- Business
- Forbes
How The Battle For Merchant Acquisition Is Coming To Main Street
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. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
Finextra
09-07-2025
- Business
- Finextra
Truist unveils Merchant Engage
Truist Financial Corporation (NYSE: TFC) today unveiled Truist Merchant Engage, a new integrated merchant services platform designed to help small and medium-sized businesses (SMBs) streamline operations, gain real-time insights and scale with certainty. 0 The launch marks a significant expansion of Truist's payments product suite and underscores the company's commitment to delivering modern, scalable technology that deepens client relationships and drives focused growth. This milestone reinforces Truist's ongoing investment in innovative payments technology — built to meet evolving client needs and position the bank at the forefront of digital financial services. The rollout, which began in late June and will continue into early 2026, marks a major step in Truist's journey to modernize business banking and deliver integrated, insight-driven solutions. It also marks the U.S. debut of the Pollinate platform, with Truist as the first U.S. bank to bring this solution to market. Truist Merchant Engage offers a smarter approach to serving business clients by unifying core financial services and merchant solutions into a single, intuitive digital experience. The platform features real-time dashboards, dynamic onboarding, product discovery and self-service tools that simplify operations and unlock insights. Many of the over 30 million SMBs in the U.S. — representing 99% of all businesses — still rely on non-integrated payments and business services providers, costing them up to a full day each week in administrative tasks. Valued at approximately $40 billion, the U.S. merchant acquiring market presents a significant opportunity. "At Truist, our approach to payments is built on simplicity, speed, and safety — principles that guide how we create meaningful value for our clients," said Truist Head of Enterprise Payments Chris Ward. "Truist Merchant Engage is more than a product — it's a reflection of our purpose-driven commitment to lead the industry with integrated solutions that help businesses thrive. By unifying business banking and merchant services into one seamless experience, we're enabling SMBs to operate more efficiently, make data-driven decisions and grow with confidence." "Our partnership with Truist is about helping a forward-looking institution deliver on its promise to small and medium-sized business customers," said Pollinate CEO Fiona Roach Canning. "Banks have the product breadth to serve SMBs better than anyone — but what's been missing is the experience layer to unify merchant acquiring with business banking. Pollinate helps banks bring this together in a way that's intuitive, intelligent and built for modern business owners."
