Banks Fast-Track Merchant Acquiring to Cement Small Business Loyalty

Across more than 10,000 banks and credit unions in the United States, only a small subset has a direct merchant acquiring strategy.

Yet, one would be hard-pressed to find a single bank that does not have a small- to medium-sized business (SMB) banking strategy in-house.

“It’s a natural extension [of that small business strategy] to allow those small businesses to accept card payments and other payment options as part of that relationship,” Maverick Payments Vice President of Bank Strategy and Partnerships Kyle Becker told PYMNTS.

To keep those small business clients loyal — and to attract new clients — takes planning, he said. Financial institutions (FIs) should start now, not later, to maximize their payment monetization strategy.

In crafting a merchant acquiring roadmap, regulators eyeing banks entering new business segments will be on the alert, he said. FIs need to ensure that they get a “non-objection” from the appropriate agencies.

Of the partnership model, in tackling the regulatory and technical challenges, Becker said: “We’re along for the journey when FIs want to get into that space.”

For the small businesses themselves, there’s an appeal in working with FIs to accept payments, he said. Most small businesses already have relationships across two to three different FIs, and they want to keep payments capabilities, treasury management and cash flow management, along with access to capital, concentrated with a limited number of banking and provider relationships.

Where Maverick comes in is by providing a one-stop tech stack, back-office infrastructure, dedicated support and data imperative to running every aspect of the merchant’s payment processing, including fraud prevention, payout information, support assistance and more, Becker said. The company handles the merchant card acceptance relationships.

As macro pressures and tariffs inject uncertainties into day-to-day operations, payments acceptance could improve cash flow and keep SMBs from having to take on loans to keep the lights on and the inventory in stock.

The commerce landscape is varied, and Becker said emerging markets such as CBD, gaming or digital goods have unique needs. Yet some FIs may balk at providing a full suite of services to those firms.

Maverick, he said, “takes a thoughtful and purposeful approach to the merchant verticals that we accept — whether it be enhanced due diligence for certain verticals that might pose higher chargeback risks, or verticals that have longer time to delivery with their product and services. Those all come into account in terms of making sure that whatever verticals we stand up for our partners are done in a safe and sound manner.”

Battling Fraudsters

Fraud is top of mind as transactions are done digitally and in card-not-present (CNP) environments. There are over $10 trillion in transactions in the U.S. annually, Becker said, and more than 20% of those are done via CNP.

“There’s the need for more secure payment gateways,” Becker said, and for advanced technologies such as geofencing to ensure compliance for online commerce. Friendly fraud is a persistent issue, and for Maverick Payments which works “with [multiple] processors and card brands … mitigating fraud by using solutions that focus and adhere to the highest security standards is critical,” as is Bank Secrecy Act and anti-money laundering compliance.

There’s no set-it-and-forget-it status when it comes to card payments, and Becker said Visa announced material changes to its acquiring monitoring program that entails more robust risk management.

Asked about artificial intelligence, Becker said AI is being used as a catalyst for faster, more robust data analysis in areas like risk management and transaction monitoring.

“We have solutions that aid in compliance and ensure our merchants are selling the products and services [for which] they were approved,” he said.

With the continued adoption of real-time payments, he said, AI and machine learning are integral tools used by the firm’s risk and compliance teams.

In terms of the long-term roadmap, Becker said: “It’s rare that a bank will go from not having a merchant acquiring strategy to being a full-service merchant services provider.”

But banks can find value in monetizing payments and executing an acquiring strategy by using opportunities to become sponsor banks, as their charters tap into bank identification numbers (BINs) at Visa and Mastercard that are in turn “dedicated” to full-service payments providers such Maverick Payments as their strategic partner, he said.

“The benefit there is the bank is getting non-interest fee income from Maverick Payments to rent the BIN, as well as low- to no-cost deposits,” he said.

The Maverick Dashboard, he added, is a white-label online platform that lets FIs serve their small businesses at the point of contact seamlessly — along with cross-selling opportunities.

“We can be [strategic] ‘thought partners’ for what makes the most sense for that FI based off their current strategy, risk appetite … and what their strategy and target markets are for the small businesses they support,” Becker told PYMNTS.