The Power of Payments Is About More Than Fee Income
By Nicole Volpe, Contributor at The Financial Brand
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From the earliest deposit-taking institutions to today’s digital challengers, banking’s defining feature has been that the same institution both safeguards money and moves it, turning stored balances into a medium for everyday payments. That’s an oversimplification, of course (a little lending is part of the story too!) but it points to something important that sometimes gets lost in an increasingly fragmented financial services landscape: payments matter.
The strength of a bank’s relationship with its customers is tied in no small part to the role it plays in how those customers make and receive payments. When that part of the relationship weakens, the broader relationship often does too.
For small businesses, payments are a major part of day-to-day operations: how they get paid, how they manage cash flow, and how they support their own customer relationships. When a small financial institution offers only minimal payment services to its business customers, it gives up one of the key supports of relationship primacy.
For financial institutions looking to defend and deepen their relationships, the starting point is a shift in mindset: payment processing is a source of fee income, but it is also a source of connection, insight, and relationship stickiness that can help drive long-term value and deepen engagement.
Want more insights like this? Check out Elan’s content portal: Credit Card Issuance: Strategies & Solutions
State of Play
To understand why this is the case, it helps to start with the experience of the small business. While most of them report strong performance they also, and to an equivalent degree, acknowledge looming pressures. According to a 2025 survey by U.S. Bank, 88% of small businesses said they grew in the past year and 96% describe their business as successful. But at the same time, 98% cite the broader economic environment as a significant source of stress and 92% cite market competition as a major concern.
These businesses recognize how important cash management can be to their quarter-to-quarter performance and even survival. They want to uplevel their payments capabilities but come up short when they try to cobble together their own stack of third-party services.
Meanwhile, many community banks and credit unions come to a similar conclusion when they consider beefing up the merchant processing capabilities they offer. These institutions understand that their business clients need strong and flexible payment services but they similarly struggle to connect the dots on the ROI associated with providing such solutions. This is especially true given the high technology investment required to offer even minimally competitive capabilities.
As a result, banks and credit unions have reason to take a broader view of the return on offering payment services — and to consider other options besides building their own solutions, such as partnering and white-labeling with a larger-scale provider.
The value they stand to gain is not limited to direct revenue, though that is also part of the package. It also includes the potential to become more deeply embedded in the customer’s operations, gain greater visibility into their needs and challenges, and give themselves a better chance of remaining its primary financial partner.
A Stronger Operating Connection: Becoming the Hub
Merchant services create ongoing interactions between a small-business customer and its financial institution because payment acceptance sits within the beating heart of the business. It touches receivables, checkout, billing, cash-flow timing, and customer convenience. “Payment acceptance positions the bank or credit union as a true hub,” said Scott Kadets, Senior Vice President, Head of Channel at Elavon, a merchant payment solutions provider.
“It positions the institution as the small business’s operating platform in a way that a loan or a basic business account cannot on their own.”
That connection to the customer’s day-to-day operating reality matters more as small businesses look for payment tools that fit smoothly into existing workflows. A survey of “Main Street SMBs” by PYMNTS Intelligence found that 72% identified ease of use as the most important factor in choosing a payment processor.
It also reports that 80% said they need more digital tools to make their jobs easier and that businesses increasingly want payment platforms that connect with other systems without adding complexity.
Operating Insight: Anticipating the Customer’s Needs
A further advantage of playing a central role in a business client’s day-to-day financial operations is the insight it gives a financial institution into how that business actually runs. Transaction activity can reveal sales patterns, revenue pacing, seasonality, and customer purchasing behavior. Institutions tap into that visibility to have consultative discussions about improving efficiency and supporting growth, or reducing risk and gaining peace of mind.
Elavon’s Kadets offered the example of a specialty wholesaler whose supplier payables routinely come due before their receivables peak. In that case, a banker — armed with insight into the wholesaler’s cash flows — might recommend the client shorten the receivables cycle through faster invoicing or early-payment incentives.
They might suggest negotiating longer supplier terms or timing payments more carefully. They might initiate a conversation about extended supplier terms and short-term working-capital tools, and how they can help businesses manage cash-flow gaps. If the mismatch is recurring, they might also offer to set up a working-capital buffer such as a line of credit or receivables financing.
Competitive Landscape: The Small Institution’s Edge In a Diversifying Marketplace
The transformation of payment services from a set of utilities to an engagement driver and a trigger for consultative sales plays to the smaller institution’s strengths — its local presence and market knowledge, and its personal touch. Some 76% of small-business borrowers report satisfaction with credit unions, according to a 2026 Federal Reserve study, compared with 64% for large banks and 35% for online lenders. Familiarity, local knowledge, and direct access to decision-makers still matter.
Kadets said: “For institutions that are already deeply conversant in their customers’ needs and markets, merchant processing can help them advance to the next level — and really understand their operating dynamics at a granular level.”
By offering merchant services, a community bank or credit union can extend those strengths into dimensions of the customer relationship that might otherwise be out of reach, including digital transformation and strategic consulting. Outsourced merchant-processing models in particular can make the economics more workable by providing access to a full menu of integrated payments capabilities.
Small businesses, for their part, are fairly clear about what they want when it comes to payments. And flexibility is at the top of the list, both for themselves and their customers. More than 85% of SMBs surveyed by Paysafe say it is important to have the option to pay expenses by bank account or credit card depending on cash-flow conditions.
Meanwhile, 96% of SMBs that accept in-person payments say they plan to upgrade payment technology in the next 12 months, 80% say they need more digital tools to make their jobs easier, and 92% now accept digital wallets.
Delivering consistent experiences across multiple use cases and channels is part of the baseline expectation; from suppliers to consumers, they must work as promised. Some institutions opt to build these capabilities in-house. Many others achieve them more efficiently through third-party platforms or partner-based models that provide faster deployment, lower upfront costs, and continuing access to new technology.
