Beyond Payment Acceptance: The Evolving Role of Banks in Merchant Services

The digital commerce landscape is rapidly evolving, and merchants are facing increasing challenges in adapting to the changing needs of their customers. 

Customers are looking for greater choice in payment options, as well as a superior payment experience. In this dynamic environment, banks have an opportunity to expand their role in merchant services beyond traditional payment acceptance. By providing integrated solutions that cater to the needs of merchants, banks can become valuable partners in helping businesses thrive in the digital economy.

A crucial aspect of the evolving role of banks in merchant services is the provision of comprehensive payment processing solutions. While traditional card payments remain an essential part of commerce, new payment methods, such as mobile wallets and digital currencies, are gaining popularity. According to a recent report, transaction value in the mobile point-of-sale payments market is projected to reach US$3.78 trillion this year. The same report found that transaction value is expected to show an annual growth rate (CAGR 2024-2027) of 13.45% resulting in a projected total of US$5.52 trillion by 2027.

As merchants grapple with accepting multiple payments methods, they face the challenge of disjointed fund payment and disjointed reconciliation. Through integration with merchants, banks can ensure all funds are paid promptly and reconciliation is simplified.

Fraud detection and prevention is crucial

In addition to payment processing, banks can go beyond their traditional roles and offer value-added services that help merchants optimize their operations. One area of significant importance is fraud detection and prevention. As digital commerce expands, so do the risks associated with online transactions. A recent report forecast merchant losses from online payment fraud will exceed US$362 billion globally between 2023 and 2028, with losses of US$91 billion in 2028 alone.

By leveraging their expertise in security and risk management, banks can offer sophisticated tools and systems to identify and mitigate fraudulent activities. These invaluable services promise to protect merchants from financial losses and enhance customer trust in their businesses, thereby boosting banks’ overall success and creating stronger brand loyalty.

Integration services are key to a better payment experience 

To further enhance their partnership with merchants, banks can facilitate seamless payment acceptance product integration with merchant systems to offer a better customer experience. Such integration can allow payments to be initiated through the merchant’s efficient consumer response (ECR) system that drives the point of sale (POS) system, thereby speeding up payment queues, increasing the accuracy of transaction and delivering a more seamless customer journey. 

Integration with a merchant’s customer relationship management (CRM) system enables goods to be purchased online and, when required, refunded in a brick-and-mortar store. By integrating payments into merchant systems, they can streamline their operations and gain valuable insights from data analytics. This not only increases efficiency, but also enables businesses to make informed decisions based on accurate and up-to-date information.

Banks have an opportunity to become invaluable partners to merchants, offering expertise and guidance in navigating the complexities of the digital economy. Banks, with their access to vast amounts of financial and transactional data, can provide merchants with valuable insights and recommendations based on industry trends and customer behaviours. This helps businesses make informed decisions that drive growth and competitiveness in the marketplace. By becoming trusted partners, banks can build long-lasting relationships with merchants, solidifying their position and contributing to the success of the overall merchant ecosystem. By doing so, banks can increase their share of wallet, improve retention and increase cross-selling potential with merchants, as well as differentiate themselves from other providers.

Small and medium-sized enterprises (SMEs) often face unique challenges in navigating the digital commerce landscape. They may lack the financial resources and technical expertise to adopt and implement complex digital solutions. Banks can play a crucial role in supporting SMEs by offering tailored solutions that cater to their specific needs. This may include simplified payment processing options, easy-to-use integration platforms and personalized guidance throughout the digital transformation process. By empowering SMEs, banks contribute to economic growth and strengthen local business communities. 

Banks can elevate their merchant services with solutions such as Fiserv's Acquiring as a Service (AQaaS), which offers seamless payment processing, advanced fraud detection and digital integration. Such solutions empower merchants and enhance customer experiences through cutting-edge solutions and data-driven insights.

As the digital commerce landscape continues to evolve, banks have an opportunity to expand their role in merchant services and provide integrated payment acceptance solutions for businesses. This not only benefits financial institutions themselves, but also contributes to the growth and prosperity of the entire merchant ecosystem.