Why Is Offline Merchant Acquisition Key to Payment Adaptation?

In the past, cash was cherished for its fungibility and the instant gratification it provided, enabling us to purchase anything we desired across the country. Cash operates universally, is non-discriminatory, and offers a straightforward physical transaction experience. However, the rise of digital payment systems is gradually reducing the prominence of cash. While cash is convenient, it poses significant costs for governments to maintain its circulation. The expenses related to printing, storing, securing, and transporting cash introduce various risks and challenges. As we adapt to digital payment methods, many of us have become

with their convenience and security. The ability to conduct transactions anytime and anywhere has led to a rapid increase in their adoption. It appears that the trend of carrying large sums of cash may soon become obsolete. It’s also important to note that the proportion of payments made using cash continues to fall, and we expect this trend to persist in the future

Barriers to a Cashless Economy

There are various barriers to achieving a cashless society, and one of the most significant is the acceptance of electronic money by merchants. Technology is driving a uprising in payment methods that facilitate transactions for businesses. However, an adoption gap still exists.

The Rise of Online Merchants

In recent years, the acquisition of online merchants has increased, propelled by the nation’s digital transformation and the government’s strong push toward a cashless economy. These technologies enable businesses to onboard merchants quickly and cost-effectively, opening doors to new markets and diverse merchant demographics. As a result, merchant networks are expanding rapidly, bolstering the digital economy and promoting financial inclusion by integrating more businesses into the formal financial system.

The Challenge of Offline Merchants

However, in many markets, merchant acquisition remains deeply local and largely offline. With the explosion of digital commerce, is the industry trending in the opposite direction?

To process a transaction, the payment system needs to have internet access. When there is a temporary loss of internet connectivity, payments can continue using either cash or traditional banking systems. In countries like Ethiopia, ninety percent of merchants are still offline. So, how do we build acceptance for electronic payments both offline and online?

That is where offline merchant acquisition plays a big role.

Offline merchant acquiring is experiencing exponential growth, Merchants shift from POS to QR code payment due to their convenience, reliability and ease of use, allowing for seamless payments without the need for costly POS terminals, connection error or complex setups . However, companies specializing in QR code merchant acquiring face challenges such as low activation rates, weak ring-fencing, and frequent merchant switching.

Cross-Selling Financial Services

Major players in merchant acquiring are successfully cross-selling financial services like lending and insurance to merchants using QR code payment systems. This strategy enhances merchant engagement, diversifies revenue streams, and boosts retention and loyalty. A growing number of banks and fintech firms are tapping into the QR code payment space due to its rapid scalability and cost-effective merchant acquisition. The simplicity of QR codes enables these institutions to onboard a vast network of merchants with minimal infrastructure, thereby fueling competition and expanding market share. This trend also accelerates financial inclusion by providing accessible payment solutions to a broader audience.

Connecting the dots. . .

What does the future hold for merchant acquiring?

With the growing adoption of real-time payments and a significant number of merchants yet to be digitized, acquiring has become an attractive yet highly competitive space for banks and fintech companies. However, unlocking the potential of merchant payments presents challenges for acquirers, who primarily face three key difficulties:

1. Achieving Scale: Success in this space is closely linked to building robust operations that can address the diverse needs of merchants. Without scale, it becomes difficult to offer competitive services and attract a broader merchant base.
2. Fragmentation of Payment Systems: The current landscape of real-time payments is highly fragmented. Merchants often need to use multiple integrations with various APIs, which complicates the payment process and can deter adoption.
3. Customer Loyalty: Loyalty has long been a critical component of payment systems. Building strong relationships with merchants and ensuring their satisfaction is essential for retaining them in a competitive market.

Conclusion

payments are increasingly just the start of a much wider relationship. The payment options and solutions that merchants adopt will be influenced by the way consumers interact with brands. As people become accustomed to the simplicity, convenience, and flexibility that technology brings today and in the future, merchants are always seeking simple and seamless ways to facilitate payments. This includes options such as QR codes, biometric payments, subscription payments, and Buy Now Pay Later (BNPL) solutions.

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