Over the past years, banks have faced many challenges – from declining revenues from traditional business lines and intensifying competition from fintech and tech giants to the never-ending struggle to modernise legacy infrastructures. Banks are pushed to seek new revenue streams to bolster their bottom lines. And there’s one area that they’ve long abandoned but that now looks especially promising for boosting revenues: online acquiring.

Fintech Competition Drives Banks from Online Acquiring

Online acquiring is the process through which businesses accept payments for goods and services online, facilitated by acquiring banks or payment processors. This system allows merchants to process credit and debit card transactions, enabling them to sell products online efficiently.

There were several reasons why banks began to withdraw from offering online acquiring services. For one, it was costly and complex for them to establish and maintain their own payment-acquiring systems.

Banks relying on legacy systems just couldn’t keep pace with the rapidly changing e-commerce demands, which came with new system requirements. As specialised providers and fintech companies emerged, banks found it increasingly difficult to justify the investment required to maintain this business. So, they chose to drop online acquiring and focus on core banking services.

Returning to Online Acquiring: A Strategic Move

Nowadays, the online acquiring market presents an attractive revenue opportunity for banks again. E-commerce sales are steadily growing, taking an increasing share of the sales pie. Globally, online sales are estimated to surpass $5.3 trillion in 2026. Moreover, open banking has triggered new transaction types, such as account-to-account payments and request-to-pay systems.

In some regions, these innovations are growing at a faster rate than traditional payment methods like cards or digital wallets. This rapidly expanding digital commerce landscape poses new revenue opportunities for banks.

Some major retail banks, such as Barclays in the UK, have already returned to online acquiring. This strategy has proven successful, particularly through its Barclaycard merchant services – in Q3 2023, Barclaycard UK saw a 9% increase in acquiring volume compared to 2022.

It’s also worth mentioning that Barclays has recently placed great focus on integrated digital solutions and APIs that enable quicker payments and streamlined treasury operations. This further improves e-commerce experiences for businesses, allowing Barclays to attract more merchants to their platform. This, in turn, leads to increased transaction volume and higher revenue for their online acquiring business.

Fierce Competition Challenges Banks in Online Acquiring

Banks are well-positioned to capitalise on online acquiring. They have the necessary financial resources, regulatory expertise, and technical knowledge to succeed. No less important – banks have long-standing relationships with merchants and enjoy a high level of trust from both businesses and consumers.

Then, there’s the “but.”

The online acquiring market has changed and evolved since banks left this space. Today, banks face stiff competition from established online acquiring companies (think Adyen or Stripe), as well as smaller fintechs. These competitors have built their businesses around seamless customer experiences, which has allowed them to capture significant market share.

So, now what?

How to Catch a Moving Train

Banks have to find a way to enter or re-enter the highly developed online acquiring market. And there are a number of options to do it.

They can build an in-house gateway from scratch. But that’s an expensive and time-consuming process many may not have the luxury to pursue. Alternatively, they can outsource to a third-party online acquiring specialist. However, that significantly limits a bank’s ability to grow market share and profitability in this sector.