United States
For many financial institutions, merchant services was once thought of as a nice-to-have. It was simply a supplemental offering for business clients rather than a core growth strategy.
Today, that mindset is changing. Merchant services has become one of the strongest treasury opportunities for community banks, regional banks, and credit unions. That’s because merchant services is an effective, nonintrusive way to deepen commercial relationships, increase deposits, grow fee income, and protect valuable business clients from large fintech competitors that offer merchant services as well as banking services.
In a market where business banking relationships are increasingly won through service, speed, and data, not just rates, merchant services is becoming the new land of opportunity. Now is your chance to strongly compete in your market and insulate against client attrition by offering best-in-class merchant services to your commercial clients and communities.
Business Clients Expect More Than Just Payment Acceptance
Every business needs to be able to take payments. Depending on the type of business, they may need to accept credit, debit, ACH, and cash. Their customers may expect tap-to-pay, digital-wallet acceptance, online payment portals, QR code payments, and more.
This means that payment processing and ways for businesses to accept cards are not enough. Today’s merchants are also looking for:
- faster access to daily sales
- simplified ways to invoice and bill customers
- better reporting and insight information on customer spending habits
- point-of-sale and software solutions to help manage their business
- stronger fraud protection and security support
- a partner who helps them operate more efficiently and can offer easy, real-time access to support
Business owners are not so much shopping for “credit-card processing” anymore. What they’re really looking for is operational infrastructure. Financial institutions that can deliver this to them, along with personalized, knowledgeable recommendations and support, become much more valuable relationship partners. If they can't find this from their existing financial institution, they will seek a solution elsewhere.
Merchant Services Drives Stronger Deposit Relationships
For financial institutions, providing payments services to commercial/business clients not only meets their payment-acceptance needs, but it also naturally strengthens treasury and deposit relationships. This may be the biggest advantage of a strong merchant-services program.
With an effective merchant-services partner operating as an extension of your team, you stand a much better chance of keeping client deposit accounts in-house. This in turn gives you:
- operating account primacy
- larger and stickier DDA balances
- faster settlement preferences that keep funds at your institution
- better visibility into business cash-flow patterns
- stronger treasury management cross-sell opportunities
The great thing about merchant services is that it’s often the front door to ensure that your bank or credit union becomes the client’s primary financial institution. In other words, merchant services isn’t just a payments product. It’s a relationship product.
Fee Income Matters More Than Ever
As you know, the traditional ways in which community and regional banks and credit unions make money are becoming less predictable, less profitable, and more competitive. Net interest margins are tightening. Loan demand is softer due to high interest rates and inflation plus economic uncertainty. Deposit competition is increasingly intense. And fee income from traditional sources, like overdraft fees, service charges, and mortgage origination and refinance fees, is under pressure.
In this setting, non-interest income becomes increasingly important. Merchant services is a great way to add new fee-based income to Treasury.
- recurring fee income from commercial deposit-account fees
- revenue-share opportunities
- stronger commercial account profitability
- higher lifetime value per business client
For institutions looking to grow without relying entirely on spread income, merchant services creates meaningful diversification as well as deeper relationships, which in turn solidifies your portfolio and helps it grow day by day.
Fintech Competitors Are Already Using This Strategy
In recent months, we’ve had conversations with numerous banks and credit unions about this significant threat. You’re no doubt aware that companies like Stripe, Square, and PayPal aren’t simply selling payments. They’re using payments companies to run their business.
The large fintechs are cutting out smaller financial institutions by meeting a business’s merchant-services needs then offering a host of additional, convenient capabilities, including:
- operating accounts
- lending relationships
- software dependence
- employee management
- inventory control
- treasury services
- long-term business loyalty
- data analytics and marketing
They start by providing payments, then they capture treasury services followed by lending, issuing, money movement, and financial operating systems. Merchant services is the doorway to everything.
Financial institutions can no longer afford to treat merchant services as secondary while fintechs use it as a primary acquisition engine. Today, it’s often where business relationships are won or lost.
The Right Partner Determines the Outcome
Not all merchant-services programs create the same value, however. Sometimes having a weak or mediocre partner is worse than having no partner at all. If you’re stuck with a merchant-services partner that doesn’t drive commercial growth and provides lackluster products and services to your business clients, you’re just getting further and further behind.
Here at Payroc, we believe financial institutions should evaluate prospective merchant-services partners based on:
- sales enablement and support practices
- underwriting and risk management strength
- dedicated in-house support and service responsiveness
- modern technology and integrations
- reporting and portfolio visibility
- compliance and third-party risk readiness
- funding speed and operational reliability
- flexibility across industries and merchant types
The truth is, the right partner makes all the difference. The right partner helps merchant services become your growth engine instead of an outsourced afterthought.
Opportunity Belongs to Institutions That Act Quickly
Merchant services is no longer a side offering tucked inside business banking. It’s one of the clearest opportunities you have to strengthen commercial growth, improve retention, increase non-interest income, and defend against fintech disruption. In today’s competitive environment, the institutions that treat merchant services strategically will be the ones best positioned to win more business relationships and keep them.
But opportunity especially belongs to institutions that act quickly to strengthen their merchant-services programs. Why? Because the environment is already highly competitive, and delaying making this necessary change will only compound the challenge you eventually have to solve.
To learn more about evaluating your current merchant-services program and upgrading to a partnership that will help you enhance commercial relationships, increase deposits, and grow fee income, connect with me by selecting “Get started” here.