Rise of Fintech

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‘MERCHANT ACQUIRING AND THE $100 BILLION OPPORTUNITY IN SMALL BUSINESS.

Undoubtedly,?the pandemic’s economic implication was the prime reason for?the first time reduction in global payments returns in 11 years. But surprisingly turned out encouraging?although the menace on the payments was observed. Payments returns have fallen but below anticipation by a meager ?$1.9 trillion globally. Pointers indicate a nominal but not equal geographically?recovered from the setback in 2021, taking return back at the level of record high in ?2019’s. Now onwards many global reputed economic analysts expect a coming back to historical mid-single-digit growth rates, creating 2025 global payments income approx. $2.65 trillion. The relatively bend topline numbers in 2020 convey certain significant counterbalancing effects, that can surely balance the scale of chance for payments will take more time..

The pandemic has given already?the pace of momentum constant drops in cash usage and the proliferation of electronic and e-commerce transaction systems. The increase of revenue in such sectors was balanced by the hardening of net interest margins made on deposit balances. All of these drifts are?to continue longer than the pandemic. The shrinkage of net interest income along with an advanced technology improvement and the emergence of open banking and fintech innovation has stimulated the invention of unique revenue strategies at within five years that will help offer in line becoming comparable to the core payments revenue pool.

Primarily, ?the exceedingly highlighted field of digital currency is poised to a cusp. Leading private entities are preparing the launch of “stable coins,” At the same time several central banks are also mooting strategies for central bank digital currencies (CBDCs) and concurrently also exploring passing new rules and regulations to administer and control with dual objectives of consumer safeguarding and maintaining the value of the traditional monetary policy. The tendency may be progress in any of several directions or in the end found to be more flimflam than material. In “CBDC and stable coins are ?having a ?close cohabitation on an indeterminate road,”

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.The dawn of Software-as-a-Service (SaaS) and several startups doing their activity based on API communication has made possible a wide-ranging landscape of third-party accessibilities to extend powerfully built multi-functional workspaces. How transaction banks are to makeover treasury services? The advent of white-label treasury as-a-service solutions, the digitization of corporate payments, and the choices that banks have in this growing ecosystem to defend and extend client prospects. We can look at how the new payments next to revenue models will help define the future of merchant services, as the line dividing payment and software stays too distorted. “Merchant acquiring and the $100 billion opportunities in small business” designates the standing of escalating merchant acquiring and services to incorporate a fuller array of commerce-related services, the distinction of merchant needs between large corporate enterprises and small and medium-sized enterprises together with various sectors, and the ongoing impact of omnichannel commerce on merchant services. & Securities Global payments 2021.

Revolution amid tempestuous traces has enabled the global payments sector is self-assured for a swift return and healthy growth, but the profits will not stream uniformly to all contributors, and the ongoing digitization of commercial and consumer transactions put up even superior bestowed upward momentum than predicted. Global payment revenues totaled $1.9 trillion in vogue in ?2020, a 5 % reduction from that of 2019, in the light of equated to the 7 % progress rate seen during 2014 to 2019. One side continued cash dislodgment and a return to global economic growth will escalate present upward trends in the share and number of electronic transactions. Other side, ?interest margins will probably likely remain subdued. Sustained softness in this key topline contributor will create a greater incentive for payments players to pursue new fee-driven revenue sources and to expand beyond their traditional focus to adjacent areas such as commerce facilitation and identity services. If we take into account the above expectations we expect global payments revenues to quickly return to their long-term 6 to 7 percent growth path, reclaiming the lost position. These traces as “payments” become further absorbed into commercial and consumer commerce journeys, established payments providers will gain access to next occasions as huge as the core payments revenue pool. Of course, an opportunity of this magnitude draws attention—tech firms and ecosystem competitors are already focusing on these attractive (and often less regulated) elements of the payments value chain, rather than traditional interchange, acquiring, and transaction fees linked to payment flows. 2020–

Almost 5% ?decrease in payment revenues is collected of different regional trends: Asia–Pacific, which has consistently been a frontrunner heading other regions in payments revenue growth over the past decade, registered a 6 percent pullback in 2020, while Latin America’s 8% reduction was precipitous of all regions. Europe, the Middle East, and Africa (EMEA), and North America acknowledged revenue declines of 3%t and 5 %, respectively, mostly driven by continued reduction of net interest margins (NIMs) in EMEA and contracting credit card balances in North America.?Asia-Pacific dominates the global payments revenue pool. Payments revenue, 2020, % (100% = $ billion) as under:

1.???Cross-border payment services (B2B, B2C).

2.????Net interest income on current accounts and overdrafts.

3.????Fee revenue on domestic payments transactions and account maintenance (excluding credit cards).

4.????Remittance services and C2B cross-border payment services.

In cash demand is leading to increasing unit servicing costs for its distribution and collection, prompting banks to review ATM footprints and rethink their cash cycle management. One response has been growth in ATM sharing between network banks and greater outsourcing of ATM servicing to specialized cash-in-transit (CIT) players. and Prosegur Cash to provide comprehensive ATM outsourcing services). Regulators in countries with dramatic reductions in cash usage are preparing strategies to ensure continued availability of central bank currency and access to resilient and free payments systems for all—including the un- and underbanked. The situation is driving heightened interest in central bank digital currencies (CBDCs), as discussed in chapter 2. Retailers, particularly digital commerce marketplaces, have elevated their competitive position, moving from traditional credit-card and consumer-finance solutions to pursue deepened customer engagement leveraging payment solutions.. Globally, the number of non-cash transactions grew by 6 percent from 2019 to 2020. Digital-wallet usage upsurged, as consumer point -of-sale and billing spaces (the latter representing a B2B opportunity as well), and their more straightforward paths to monetization. The pandemic has pushed businesses to?be able to download and deploy digital wallets from these banks without holding an account with them. Potential benefits include mitigated KYC risk and reduced compliance cost related to transaction monitoring and reporting, given eCNY’s “controlled anonymity” (only central banks will have full access to trading data). Enhanced technical underwriting capabilities are also anticipated, creating competitive differentiation for participating banks. As a social benefit, digital currency is expected to streamline the distribution of targeted subsidies. CBDC and stable coins: Early coexistence on an uncertain road 20 Concurrently, the PBoC has been testing cross-border payments with CNY in Hong Kong, in a joint effort with the Hong Kong Monetary Authority. Considering the more than $500 billion of import/export trade between Hong Kong SAR and the Chinese Mainland, the combined impact of cross-border CNY and KD being piloted could meaningfully impact existing financial markets and operators via lower transaction costs, more efficient (real-time) settlement, and support for product innovations reinventing treasury services As clients demand solutions to enhance their corporate treasury activities, banks are increasingly partnering with fintech and software players comprehensive SCF program include: — Internal systems integration. to third-party providers for financing and treasury-management solutions, relying instead on bank offerings. Keeping pace with daily operational realities leaves little bandwidth for digitization efforts—in fact, larger B2B buyers are often the drivers behind the modernization of smaller supplier partners. Nonetheless, relations between SMEs and their banks are often complicated, with lending terms frequently incompatible with client needs even when products are available. As a result, owners often elect to finance with personal funds or forgo debt altogether.

?It has been identified the greatest SME need to be access to liquidity, access to broader B2B markets (with cross-border funding posing particular challenges), and transaction complexity. While the threat of bank disintermediation is not as imminent for the SME market, the emergence of a compelling third-party proposition certainly poses a future risks. The liquidity management ecosystem: Solutions addressing these needs In response to these priorities, corporate software solutions are evolving to adopt cash-excellence capabilities throughout the organization.

?Extending beyond basic visibility and forecasting, these generate more accurate multicurrency forecasts, streamline workflows, and enable more robust hedging, financing, and investment decisions. — Order-to-cash/receivables solutions. These streamline the accounts-receivable process, reducing days sales outstanding, increasing collection rates, and further enhancing visibility and accuracy of cash forecasts. — Source-to-pay solutions. By simplifying accounts-payable and payments workflows, they generate benefits including reduced fraud losses, payments prioritization for identified suppliers, and increased visibility and accuracy of cash forecasting. — Integrated working-capital finance, trading, and investment activities. This suite provides treasurers and CFOs with a wider range of options than previously available, including supply-chain finance, receivables financing, and short-term investment products.

??Players and approaches differ by geography: for instance, the US market is driven primarily by third-party software vendors, whereas in Asia the solutions tend to be bank-led. Cloud-based solutions have made these capabilities more accessible to SMEs—even those without a formal treasury department—thereby significantly widening the potential addressable market. Key success factors for banks partnering with fintechs on offerings Banks, which have historically not focused on the cash-management software space, increasingly realize that providing at least a portion of this functionality and embedding themselves more 25 How transaction banks are reinventing treasury services fully into the corporate workflow reduces the risk of disintermediation from the underlying payments, investment, and financing flows of corporate customers. Accordingly, corporate liquidity-management tools—including treasury management, cash forecasting, and SCF—are increasingly embedded into the next generation of corporate GTB portals. Some banks have developed vertically focused solutions with functionality and integrations designed to meet the unique needs of strategically important customer segments. The rise of open banking, the ongoing search for new banking revenue models, migration of services to the cloud, and client demand for integrated experiences are also informing these strategic decisions. DBS has been particularly active in this arena in Singapore; for instance, using APIs and mobile apps to enable real-time payments to online merchants and delivery-service drivers (see sidebar, “Asia–Pacific focus”). Banks face the ever-present decision of whether to build, partner, or acquire these capabilities. Recent years have seen a material increase in the partnership model, for white labeling of third-party technology as well as banks acting as a channel or seller for such services. This model enables quicker time to market and faster introduction of new customer functionality. Fintechs and software players with a focus on customer acquisition and retention increasingly view banks as a priority channel and an efficient path to market (Exhibit 2). In McKinsey’s experience, the following key success factors optimize the potential for bank-fintech partnerships to accelerate their time to market as well as commercial impact. — Document a commercial approach determining both ownership and roles with regard to customer engagement. As an example, while initial contact might be conducted by the fintech.

??Corporates are seeking automation and liquidity visibility across the transaction working. Supply-chain ?Accounts payable automation Payments management Automated invoice data capture Cash and treasury Automated collections and disputes Automate matching of payments information to invoice Report relevant taxes Provide customers with request to pay and electronic invoice presentment and payments (EIPP) Run improved credit checking on both new and existing customers Bank account management Cash and liquidity management Treasury and risk management Purchase order matching Dispute resolution Streamlined prioritization and approval workflow Regulatory compliance and fraud prevention Automated supplier notification, reconciliation, and tax reporting Working capital nuance EIPP Cash application Collection and disputes Cash event Accounts receivable automation Cash event Credit management How transaction banks are reinventing treasury services 26 alone, subsequent meetings will be handled together since customers—particularly large corporations—are seeking integrated product offerings requiring expertise that extends beyond technology platforms. — Develop a go-to-market strategy tailored to customer segments. For some segments, fintech tools may be offered as white-label solutions via bank proprietary assets, thereby differentiating the commercial offer from other segments in which the fintech offers its platform as a stand-alone suite backed by a bank acting as a counterparty for the execution of payment transactions. — Identify and agree on an IT implementation and delivery road map to serve as the baseline from which the bank will develop its commercial campaigns. — Establish a dedicated IT-business governance team with recurring meetings to address commercial challenges as well as technology enhancements, potential change requests, or new deployments. — Develop internal expert capabilities in the partnership products (likely in product specialist and relationship manager roles) as well as new digital tools the fintech may bring to the table as key assets. When proposing client solutions, these individuals will ask for interactive demo sessions, during which the sales network must possess the capabilities to surf the new platform and manage the end-to-end digital process underlying the new product. — Identify KPIs by which the overall partnership will be valued and establish the proper time frame for KPI monitoring and assessment.

??Bank-fintech partnerships are ramping up in treasury services. Top bank/fintech partnership areas of focus (% of banks citing area of focus as “very important” to their fintech partnership strategies) Digital account opening Payments Lending and credit Fraud/risk management New banking products Personal loan management Investment management Insurance International remittances How transaction banks are reinventing treasury services Partnership benefits The following examples give some insights into how established partnerships work to enhance the offerings of both parties: — Société Générale and Kyriba joined forces to offer cloud management solutions to their corporate clients. These services include real-tech monitoring of treasury positions, payments automation, multibank connectivity, and ERP payment validation workflow management. — Citi’s Smart Match product, enabling corporate clients to enhance straight-through reconciliation rates in cash application is powered in part by AI and machine-learning capabilities from High Radius.

The parties formed a strategic partnership in 2018 helping Citi and its clients to merge disparate pieces of payment data and reconcile payments received against invoices issued more efficiently. Asia–Pacific focus While the Asia–Pacific payments sector has benefited from extensive fintech activity focused on digitizing small merchants and enhancing overall business efficiency, there has been a relatively lighter emphasis on modernizing treasury solutions for large corporates. Such opportunities are limited in part by divergence in infrastructure and regulatory standards across countries (currency convertibility, real-time payment rails, and market access, for example) making it challenging for banks or software providers to create solutions capable of delivering sufficient scale and value for multinational clients operating across the region. Some banks in the region have taken the initiative to develop bespoke solutions addressing specific client needs, however—for example: — Singaporean multinational bank DBS implemented a fully automated real-time payment system for drivers at ride-hailing firm Gojek. This created a differentiating feature recognized by the client as a recruiting advantage. Rather than waiting until the end of the week for payment (as with other taxi firms), Gojek’s drivers can now transfer funds to their bank account after each trip. — ICICI Bank’s STACK offering provides customized digital banking services to companies in over 15 sectors, with the goal of facilitating operations across these clients’ entire ecosystem. The Indian bank also established eight “ecosystem branches” to support and expand the rollout of these capabilities across channel partners, employees, vendors, and other counterparties. Going forward, large Asia–Pacific corporate entities are likely to enjoy features such as dynamic cash-flow forecasting, source-to-pay solutions, and multi-funder models, similar to their counterparts in more developed markets. In preparation, banks in the region should stay ahead of the curve by rethinking their treasury-services strategies. This involves determining which client groups to target (as not all capabilities will resonate equally across sectors), which features are likely to gain the most initial traction with that segment, and whether these solutions are best developed in-house or via a partnership with a fintech firm. 1 “Citi Partners with Fintech High Radius to Launch Citi? Smart Match Powered by Artificial Intelligence and Machine Learning,”?DNB’s 2018 strategic channel sales partnership with Kyriba provided the bank with a new set of updated financial management tools to centralize payments, automate workflows, and detect and prevent payments fraud in real-time for more than 220,000 corporate clients. These cloud-based services also address the need for stronger compliance and data protection required by evolving government regulation. Banks are motivated to provide broad-based state-of-the-art support for commercial banking functions that generate over half a trillion dollars globally in annual revenue. They remain in a sound position to determine their role in serving these clients going forward. Although buy and build remain valid alternatives, in most cases, a partnership approach enables banks to introduce new products and functionality more rapidly in an environment in which time to market is critical. To successfully manage partnerships with fintech and capitalize on their opportunity to play a leading role in the redefinition of treasury services, banks need to enhance a variety of internal capabilities ranging from sales management and product evangelism, to robust commercial and IT governance, and effective go-to-market strategies.?How transaction banks are reinventing treasury services Global Banking & Securities Merchant acquiring and the $100 billion opportunities in small business What will it take to grow in the age of value-added services? Our work with payments practitioners suggests a few promising strategies for serving smaller companies.?Over the past decade, core payments processing has become commoditized, squeezing the margins of merchant acquirers.

??Their future growth is likely to come from providing merchants with value-added services and solutions for enabling e-commerce. Merchants are increasingly willing to pay for commerce-enablement services, such as loyalty programs, gift cards, and affiliate marketing, as well as for payments performance improvements such as enhanced authorization rates and chargeback mitigation. What’s more, enterprises that have scaled globally or digitally are prepared to pay a premium for sophisticated multi-country processors, local support, enhanced reconciliation, payments-adjacent services, and better payments performance in general.1 This shift is even more pronounced in merchant categories where digitization has recently accelerated, such as food and beverages, grocery, and homeware. After a decade of consolidation among scale players, integration of payments and software, rapid digitization of small and medium-sized businesses (SMBs), and the emergence of powerful disruptors— independent software vendors (ISVs), fintech, and innovative merchant acquirers—this arena is strongly contested and set to become even more so in the coming years. In this chapter, The continuing rise of value-added services As acquirers and other merchant-services providers begin to offer software and services focused on commerce enablement, they are also tapping into merchants’ marketing budgets, where price sensitivity is lower and the perceived value of services is higher. Brands that negotiate hard over each basis point of merchant discounts are prepared to pay several percentage points to affiliate marketing platforms and buy now, pay later (BNPL) providers that position themselves as partners to help close a sale or drive more traffic through the door. Meanwhile, as the payments business becomes more integrated into the software, merchant services providers can address larger value pools. According to data from a McKinsey analysis of card transactions at US merchant acquirers, payments performance and commerce enablement could account for approximately 80 percent of revenue growth in payments-related merchant services over the next five years.

????Most of this expected revenue growth is likely to come from SMBs and the platforms that serve them. Categories such as real estate, education, and professional services include significant numbers of small businesses that can be expected to drive substantial growth in integrated payments solutions. This growth will be further fueled by the continuing expansion of marketplaces and social commerce, as small and even micro-businesses (such as content creators) start to use payments software and services. In total, SMBs are expected to spend more than $100 billion on payments services by 20252—an opportunity that merchant acquirers must address quickly, given the intensifying competitive pressures in the market. Four strategies for success Serving SMBs effectively will be critical for merchant acquirers pursuing growth across a range of markets. To accomplish this, acquirers should investigate a mix of four strategies. Optimize the performance of ISV partners In large, developed markets such as the United States, ISVs derive a sizable portion of their revenues from payments. The rise of ISVs is putting pressure on acquirers’ margins and shrinking their share of the merchant wallet.?

?Business development teams rush the sales process and engage only one or two executives at the ISV, failing to secure the broader organizational buy-in needed to ensure the ISV is willing to invest and drive volumes to the acquirer. — The acquirer and ISV fail to articulate shared goals that the ISV’s engineering and other teams will co-own and track. Best practices: Shortly before the deal is signed, bring in implementation and partner management teams to agree on estimates, expectations, and integration plan, and begin building relationships. Align the incentives of business development teams with deal signing, volume sales, and achieving full-scale production within 15 percent of expectations. Deal closure and implementation The following mistakes are sources of problems during closure and implementation of a deal: — Multiple handoffs across business development, implementation, and partner management result in poor accountability and a subpar experience for merchants, which may then defect. — Incentives for business development teams are based on deals signed, not actual payments volumes processed.

??The acquirer and ISV tech teams are not aligned on the resources needed to meet integration milestones and timelines, so they miss targets. No clear plans exist for getting the ISV to scale through co-marketing, targeted campaigns, key performance indicators (KPIs) for the first 180 days, and so on. Consequently, growth goals are never reached. — Merchant onboarding lacks the speed and flexibility necessary to ensure a smooth experience. For instance, tasks are merchant acquiring and the $100 billion opportunity in small business The first 180 days During the first 180 days following an acquisition, additional missteps are common: — The tracking of the highest-impact service-level agreements (SLAs) is not sufficiently disciplined to ensure the success of integration and ramp-up. — A linear (rather than parallel) approach to transaction processing slows do reduced to wn testing, discovery, and the tackling of issues. Best practices: Quickly get the first few percent of transactions live to identify and address issues. Track satisfaction of key client executives at deal signing, 45 days, 90 days, and 180 days to ascertain the trajectory and address emerging issues. Set up a small working team with two or three people from each organization; schedule monthly meetings for this team to track growth, volumes, and so on. With larger ISVs, commit a member of the sales team to spend time with the relationship manager to drive leads from the ISV. Ongoing partner management Over the longer term, additional problems can arise: — Poor responsiveness and inflexibility in changing SLAs results in attrition and/or an inability to ramp up processing volumes. — Unclear ownership between the acquirer and the ISV, the use of legacy processes for merchant servicing, and poor accountability and tracking lead to service issues and higher attrition rates. — A lack of clear metrics or processes to act as leading indicators of dormancy or poor merchant experience results in lower satisfaction and higher churn. Best practices: Set up quarterly meetings at the senior executive level for the top 30 to 40 percent of ISVs. Hold joint meetings with ISV tech teams to ensure clear reporting and to understand the tech road map, new deployments, and expansions. Cross-cutting issues Some additional issues may arise at any point in this journey: — Implementation can stall if the acquirer sources multiple solutions from one ISV without planning how to align and prioritize them; neglects outreach, leading to limited buy-in at the ISV; and fails to develop internal champions. — A cultural and talent mismatch between slow-moving incumbent acquirers and small and nimble ISVs tends to impede responsiveness, damaging the merchant experience. We estimate that, as a result of these common issues, between 30 and 50 percent of ISVs become dormant or drop off during implementation or later. What’s more, among the ISVs that get as far as ramping up, 40 to 45 percent will either go dormant subsequently or fail to reach their expected production level for the first two years. Merchant acquiring and the $100 billion opportunities in small business 34 insurance (Exhibit 2). Delivering these broader sets of services is becoming easier with the increasing integration of acquiring and software. ISVs are now able to integrate payments, financing, and a range of other products into their platforms to increase their revenues per merchant served. For incumbent acquirers, the larger the share of residuals they hand over to their ISV and bank partners, the more critical it is to target a bigger portion of merchants’ expense wallets by broadening their range of offerings. How readily they can do so depends on whether they have direct-to-merchant access and a merchant-facing portal or interface, instead of relying on other platforms and ISVs to reach SMBs. Those with direct-to-merchant access need to expand their product suite through proprietary or third-party products and adjust their economic and sales models to boost the product penetration. Those that serve merchants via ISVs could build solutions that their ISVs can white-label and cross-sell. One example of how an acquirer with indirect access can increase its share of merchants’ expense wallets is Stripe, with its suite of services across Stripe Treasury, Stripe Issuing, and Stripe Capital. The opportunity to target a larger share of wallets is greatest in mature SMB acquiring markets such as the United States and the United Kingdom. However, it is growing slowly in other markets where merchants’ expectations are rising and local solutions are evolving. Focus on specific industries Over the past two years, payments providers serving SMBs have started to organize their products, services, and go-to-market approach by industry. The convergence of payments and software, coupled with merchants’ desire to procure?Acquirers can increase their share of merchants’ wallets by offering broader services beyond pure payments. Typical expense-wallet breakdown of a small and medium-size business (SMB) with >$100,000 in sales, % 1 Includes software for accounting, ERP, inventory management, and expense management. 2Includes expenses incurred on marketplace platforms, SEO/SEM, social media, late marketing, loyalty programs, and promotions. 3Includes payments to marketplaces and directly to services providers, including returns handling. 4Includes all costs related to payments acceptance, including fraud, charge-back, and point-of-sale ?financing. 5Includes interest payments on loans, merchant cash advances, net credit term payments, invoice discounting and receivables ?financing, and equipment ?financing but not payments related to commercial mortgages. 6Includes group insurance and healthcare. 7Includes expenses related to banking and professional services such as cleaning, taxes, and utilities. Source: McKinsey analysis of the expenses of approximately 5,000 SMBs from retail, food and beverages, manufacturing, personal services, home and repair, B2B services, professional services, and healthcare Acquirers can increase their share of merchants’ wallets by oering broader services beyond pure payments.?Total expense wallet Facilities, equipment, and rent Cost of goods sold Salaries Addressable software and services spend Point-of-sale software Business management software1 Loyalty, advertising, and marketing2 Logistics and shipping3 Payroll services Payments acceptance4 Financing5 Insurance6 Other7 Unaddressable Addressable software and services spend Financial services Non-nancial services Software and platforms 35 Merchant acquiring and the $100 billion opportunities in small business solutions from a single provider, has paved the way for merchant acquirers and ISVs to deliver integrated industry-specific solutions. Whether acquirers reach merchants via proprietary channels, independent sales organizations, or banks, they need to focus on industries where they can build tailored solutions that go beyond payments. The recently launched Square for Restaurants offers services such as integration with delivery platforms, order modification, the merging of bar and table orders, and bill splitting, for example. Other providers are following similar industry-focused strategies. Mindbody, Daxko, and ABC Fitness Solutions focus on health clubs and gyms, Transact on education, AffiniPay on professional services, and Pushpay and Vanco on charities and religious organizations. Providers pursuing industry-focused strategies also need to tailor their offerings by region. For instance, large and developed economies have highly competitive markets for merchant services in general retail, consumer services, and food and beverages, while Asia–Pacific and Latin America have yet to develop such markets at scale. Moreover, industries differ in their economics, scale, and attractiveness, which will partly depend on the stage of digitization they have reached. Exhibit 3 provides estimates of the size of some key verticals in the United States. It’s worth noting that a sector focus can limit scalability, given the steady investments that in-house platforms and software solutions must make to remain competitive. An alternative strategy—pursued by Adyen, among others—is to build horizontal cross-industry platform capabilities that ISVs can use in areas such as lending, issuing, and POS financing. As acquirers gear themselves up for the next decade of competition, most have Exhibit 3 Merchant acquirers pursuing an industry-focused strategy must assess the attractiveness of each vertical. 1 Compound annual growth rate. Source: McKinsey Payments Commerce Cube Merchant acquirers pursuing an industry-focused strategy must assess the attractiveness of each vertical. The current addressable market size in the United States, $ billion General retail Restaurant focused Consumer services (eg, spas, salons) Healthcare B2B Education Government and nonprofit Other (eg, legal)?Merchant acquiring and the $100 billion opportunities in small business 36 only a year or two to decide whether to adopt a vertical or horizontal focus. Develop solutions for platforms Marketplaces such as Amazon Marketplace, eBay, Etsy, Walmart Marketplace, and Wayfair continue to capture a significant share of the SMBs and microbusinesses that are shifting to e-commerce. Overall, we expect 50 to 70 percent of digital commerce will be conducted on these platforms by 2025, albeit with differences between markets. We can expect this shift to apply across multiple industries, including media (such as TikTok), retail (such as Amazon and MercadoLibre), and travel and hospitality (such as Airbnb).

?CONCLUSION

?To succeed in this segment, acquirers need to offer specific marketplaces tailored solutions, such as cross-border disbursements and sub-merchant onboarding.? Seller-enablement solutions such as instant payouts and seller financing represent a large and underserved value pool that acquirers can access via an increasingly consolidated set of marketplaces such as Amazon and eBay. Merchant acquirers with access to sellers will also be well-positioned offer them increased platform reliability by providing enablement solutions such as continuity insurance and liability protection. As social commerce grows, social platforms and creator platforms will develop in areas such as enabling micropayments (as Twitter has done with Tip Jar and YouTube with Super Thanks), enabling creator disbursements and monetizing payments more effectively, whether within platforms or for providers that serve creators, such as Later and Ko-fi. ?

The competition?will become tougher day by day.??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????K