The payments landscape underwent a significant transformation last year. With the spread of COVID-19, merchants were faced with the challenge of optimizing the customer payment experience and building organizational resilience.
A merchant’s ability to enable and streamline payment acceptance is now at the forefront of the shopping experience. Therefore, adapting their customer-facing and operational payments processes to digital, contactless payment channels was vital. Acquiring was once a stable and steady background business which facilitated the acceptance and processing of debit and credit cards at point-of-service and remotely (via phone and mail), but it has since evolved into a key differentiator for businesses.
What Is A Merchant Acquirer?
The card acquiring bank, or “acquirer”, is a bank or financial institution that processes credit and debit cards on behalf of a company or merchant via card networks. In general, the term ‘acquirer’ can refer to either a merchant acquirer or a corporate acquirer.
Merchant acquirers help merchants with all matters related to credit cards and transactions, including:
- Payment processing:
Verifying the customer’s identity
Authorization of cards
Receiving the money from the bank that issued the card - Payment of all scheme fees on behalf of the merchant (Visa, MasterCard, AMEX, etc.)
- Assisting the merchant with refunds, chargebacks, and returns
Why Do Merchant Acquirers Need High-Value Adding Pathways?
Changing consumer attitudes toward cash and other contact-based payment methods, as well as lockdowns that limit physical interactions, have changed the way businesses manage and accept payments.
Plastic cards have long been the dominant payment method for mature markets and the adoption of more modern payment methods such as mobile payments and digital wallets has lagged for both in-store and online purchases. COVID-19 has sparked unprecedented global appetite for new forms of payment and created the impetus needed to overcome consumer inertia.
What can incumbent merchant acquirers do to remain relevant, competitive, and profitable? They can implement new payment strategies that are centered around value-added products and services rather than price. Essentially, it means finding new ways to solve specific problems that merchants and consumers face. Companies in the payments acceptance ecosystem need to think differently about the services and capabilities they provide since businesses today are looking for a partner to help them drive their business, and payments make that possible.
An area where additional value can be added to merchant acquiring is to support fraud prevention efforts. Retailers are facing tighter margins due to the economic downturn, so a potential rise in charge-backs could mean bankruptcy for many.
This challenge can be addressed by using sophisticated, data-driven anti-fraud technology that integrates fraud detection with payment and checkout systems. Identifying fake accounts, mitigating payments risk, and permitting more qualified transactions to occur results in a lower merchant cost and increased revenue, thereby demonstrating the value of a merchant acquirer.
In Conclusion
In many ways, acquirers share similar challenges with the rest of the payments industry. Acquirers’ true opportunity lies in the value-added services and technology they provide; they will continue to play an increasingly important role as payment processing becomes more commoditized. As a result, acquirers can differentiate themselves from the competition. Having such a reputation can only be positive in an industry that is characterized by a high level of consolidation and cutting-edge competition, and where revenue and profits rely heavily on it.
