As competition intensifies and merchants move to multi-acquirer models, traditional acquirers must up their game with end-to-end solutions that offer greater choice, reach, and capability. Richard Jolly, head of strategic sales at ACI Worldwide, explains how making a strategic pivot to payments orchestration can help them succeed. The global surge in eCommerce, accelerated merchant digitization, new market dynamics, and changing customer preferences are transforming acquiring service expectations.
To win in a modern world, today’s acquirers must do more than card processing. To protect their market position, they must differentiate their offerings by providing additional functionality that adds tangible value to their merchants.
It’s time to rethink traditional acquiring
The market is undergoing unprecedented change; however, three key trends are impacting acquirer strategies:
Competition and disruption Merchant acquirers face increasing competition and market erosion from “single solution” payment processors (e.g. Ayden and Stripe) and payment service providers who can rapidly achieve card scheme membership.
Consolidation and acquisition Market consolidations are bringing further disruption and eating into potential growth opportunities. This is forcing payment-acquiring providers towards more commoditized services. Traditional acquirers must innovate while balancing costs and boosting revenue to stay ahead of the curve.
Demand for multi-acquiring More merchants are realizing the benefits of working with multiple acquirers. This approach allows them to diversify risk while improving resilience and stability in their payment processing. It also introduces competitive pressure; for instance, a merchant might allocate 20% of their volume to one acquirer but give 50% to another because of lower fees. Additionally, merchants with multiple acquirer relationships can see an increase in conversion rate with 23% seeing a double-digit uplift. Acquirers that fail to offer this option are at an increasing disadvantage.
Escalating payment choice Today’s customers expect to use their preferred payment method: credit card, debit card, digital wallet, mobile app, QR code, or cryptocurrency. To increase conversion rates, merchants should offer multiple payment options to cater to different customer segments. A recent U.K. survey revealed that only 6% of acquirers offer buy now pay later (BNPL) options at checkout, despite 50% of U.K. adults having used BNPL to buy goods and services. Cards are no longer the dominant payment method; merchants should diversify their offerings or risk losing market share.
Market forces are creating a strong commercial argument for payments orchestration
Acquirers need to innovate and extend their offerings. Modern merchants are looking for tools to help them control costs, connect, and raise revenue.
According to an IDC 2023 retail core processes and applications survey, over 70% of merchants found that payments orchestration improved profitability. Two out of three experienced increased revenue growth, and over 40% saw a boost in conversion rates. Additionally, a third of respondents saw a significant uplift in customer lifetime value. Offering a full-spectrum payments orchestration platform (POP) with all the added value it brings can help acquirers differentiate, add tangible value, and compete more effectively.
Turning POP strategy into reality
For a competitive edge, acquirers must include a POP to address current and future industry challenges. They can’t afford to be held back by infrastructure obsolescence, inflexible tech stacks, decision inertia, fear of risk, or the inability to find and apply resources.
Currently, they have four options: build, acquire, partner, or white label. Which option an acquirer chooses depends on their in-house capabilities, the functionality they require, their investment budget, timeframes, and risk appetite.
Comparing the options
The table below simplifies the various criteria and how these relate to the different approaches:
Choosing the best path
Pressure from merchants and stakeholders drives this urgency to keep up with market dynamics and merchant needs. When investing, merchant acquirers face a continuous balancing act. The current economic climate makes budgeting for investment tight. Some may struggle to redesign their own-builds or face frustrations with over-expensive SaaS solutions. They may also not have the right partnerships in place, or the ones they have may be too restrictive locking them into proprietary systems, while not offering much incremental revenue. Purchasing a company may give them instant access to capabilities, but return on investment (ROI) like developing in-house, is based on the availability of the right company and may have additional undisclosed pitfalls. All of this can stall or stop their efforts. When looking to address these challenges, acquirers often overlook one of the simplest ways to pivot: the white-label solution.
A strategic pivot to white-label can fast-track success
For many merchant acquirers, a white-label POP solution presents a great opportunity to keep capabilities and platforms ahead of the curve and to deliver the advanced functionality and higher levels of choice that modern merchants demand.
Not only is it quick to implement, easier to maintain with lower IT overheads, and greatly reduces the total cost of ownership, but it is also likely to offer richer features, quicker development cycles, and customizable capabilities, leading to higher levels of innovation and futureproofing. Choosing a white-label POP solution could be the best strategy for businesses wanting to offer more competitive and diverse acquirer services, including multi-acquiring capabilities.
Richard has nearly 20 years' experience in the payments sector, with senior management roles across the payment ecosystem for card present, eWallet, card not present, and mobile wallet organizations. His payments career has included working for market leaders such as PayPal, and a fintech start-up leading to its successful IPO. His current responsibilities at ACI focus on managing the business development strategy for ACI's eCommerce and risk management platforms in Europe.
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