PSPs face shrinking margins in traditional acquiring, pushing them to embed lending, banking and other services to deepen merchant relationships and drive growth.
Payment service providers (PSPs) are at a crossroads. Traditional merchant acquiring – processing card payments for merchants – has become increasingly commoditised, squeezing margins and eroding competitive advantage. Once differentiated by price and reliability, core payment processing is now widely available and often indistinguishable between providers. Merchants, especially small and medium businesses (SMBs), have begun to expect more than just card acceptance; they seek value-added financial services that help run and grow their businesses. In fact, over the past decade, leading PSPs and acquirers have realised that future growth hinges on offering broader merchant services rather than competing solely on transaction fees.
Embedded finance plays a pivotal role in this transformation, enabling PSPs to seamlessly integrate services such as lending, banking, and insurance into the merchant experience. By embedding these capabilities directly within payment platforms, PSPs can deepen relationships with merchants, simplify operations, and unlock new monetisation opportunities. This paper explores how PSPs must evolve beyond basic acquiring into a holistic financial ecosystem – essentially becoming an all-in-one financial partner for merchants – to drive new revenue streams, increase merchant stickiness, and deliver significant added value in a challenging competitive landscape.
