Merchant Acquiring Market on the Rise

Published 6 months ago

The merchant acquiring industry is undergoing significant transformations, with a forecast for substantial growth. According to Boston Consulting Group (BCG), the industry’s global revenue is expected to reach $100 billion by 2027, growing at an annual rate of 6.9%. Small and medium-sized enterprises (SMEs) with fewer than 250 employees currently constitute 70% of this revenue and are likely to expand their share. The growth is primarily driven by online sales, which are predicted to increase by 9.9% annually through 2027.

Digital Natives Gaining Market Share

Digital natives and integrated software vendors (ISVs), such as Adyen,, Stripe, Toast, and Square, are acquiring a larger portion of the market. In North America and Europe, these players have seen their share of merchant acquiring market revenues grow from 35% to 40% in the last three years. They are not only strengthening their position in the SME space but also making inroads into the corporate segment globally.

Regional Challenges and Opportunities

In Latin America, real-time payments present challenges for incumbents, while in Asia, social commerce and integrated payment capabilities within social networks pose threats of disintermediation. Africa is experiencing a rapid expansion in mobile payment solutions.

Acquirer-Merchant Disintermediation Intensifies

With over half of SMEs in developed countries utilizing software platforms for operations, competitors like digital natives and ISVs enjoy a significant advantage. They offer integrated payment solutions expected to grow at double the rate of incumbent acquirer revenues in the US, with similar trends anticipated in other regions. Large international merchants are increasingly orchestrating their payment services, seeking to manage complex payment flows through a combination of in-house and external capabilities.

Expanding Product Universe

Merchants are demanding solutions that integrate seamlessly with their operating systems, and 64% prefer plug-in options. Responding to this, service providers are broadening their offerings and delving deeper into financial services. Companies like Adyen and Square are introducing embedded finance features, with others likely to follow suit, further driving portfolio expansion.

Streamlining Merchant Experiences

Merchants seek easy and transparent transaction processes. Recognizing this, digital natives are differentiating themselves with straightforward onboarding processes, such as Stripe’s four-input setup. They also offer dashboards and automated processes to ease chargeback handling, prompting incumbents to enhance customer journeys.

The Challenge of Fragmented Technology

Many established acquirers operate with multiple platforms and databases due to mergers and acquisitions, increasing risk and reducing competitiveness. Digital natives typically have unified payments platforms that scale with their businesses. New technologies like GenAI could assist incumbents in harmonizing different platforms, but these require time to prove their effectiveness.

Strategies for Incumbent Acquirers

Incumbent acquirers can still thrive by focusing on differentiating services, such as marketing, loyalty management, and embedded finance solutions. They will need sophisticated risk management practices to navigate the current economic environment. Moreover, reimagining merchant journeys from end to end, automating processes, and selectively upgrading technology can enhance customer experiences and operational efficiency, potentially boosting revenues and customer satisfaction.

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