Payments Industry - A 15-Year Seismic Shift

By PayNimble | "Payments Know-How. Tech to Match."

If you asked any person on the street, much less a business owner, to name a “payments company”, nine times out of ten you’d hear something about Stripe or PayPal or maybe even, Square. Ask them if their bank offers the service, and you might get a puzzled look. That wasn’t always the case.

Not long ago, the acquiring and merchant services industry was firmly in the grip of financial institutions. Today, that industry map has been fundamentally reshuffled. Fintechs and technology platforms now garner a massive share of customer relationships and the corresponding economics.

How did it happen? As with all complex systems, there is never a single, simple, answer. Was it big-bank complacency? Better Fintech technology? What role did the card associations themselves play?

Let’s take a quick look back to see what we can discern.

The World Before the Disruption: 2008–2012

The Bank-Processor Alliance Model — From its origin, merchant acquiring was managed by a series of alliances between large banks and third-party processors. Banks delivered the relationships, the branch networks, and the regulatory licenses. Processors, like First Data and TSYS, provided everything else. A merchant receiving a sales call from “X Bank Merchant Services” was often engaging with employees of the processor, cloaked in the bank’s brand.

Small Business vs. Big Business — Small business merchants were primarily acquired through branch banking relationships. A small business owner walked into their local branch and was handed a countertop terminal and a processing agreement. Square didn’t exist yet. “Easy” wasn’t a competitive differentiator because there was no hard alternative to compare it to.

For large organizations, the bank relationship was the key. Corporate treasury teams and CFOs chose from payment providers tied to their banking relationship. Simple as that.

Fintech Disruption: 2010–2015

In 2009, Jack Dorsey and Jim McKelvey launched Square with a deceptively simple idea: a small card reader that plugged into an iPhone headphone jack. No lengthy application. No bundled terminal lease. Just swipe and get paid.

Banks largely categorized it as a niche product for micro-merchants. At roughly the same time, PayPal was evolving from an eBay checkout button into a fully-fledged acquiring platform. And in 2011, Stripe launched aimed squarely at developers — seven lines of code to accept a payment online.

What Did Banks Do Next? Answer: Very Little

Internal presentations at major banks in the early 2010s spotlighted Square, Stripe, PayPal and other new entrants. All had a theory on why these pesky new providers wouldn’t be able to gain material scale. Cue the ostrich.

In addition to willful blindness, the hurtle to meeting the moment was also structural. Banks had compliance and BSA/AML obligations that made instant onboarding next to impossible. And modernizing product stacks would require years and billions. More fundamentally, acquiring was peripheral. It was a fee-based service attached to what banks really cared about: deposits, lending, and interchange income from their issuing businesses.

The Acceleration: 2015–2020

The Fintech Marketing Machine — The mid-2010s brought not just better fintech products but a relentless marketing apparatus to support them. Stripe became the default payment infrastructure for Silicon Valley startups — and Silicon Valley startups became the fastest-growing segment of the economy.

Critically, the buying decision for payments was shifting. In the old model, the CFO or Treasurer — with a longstanding relationship with the bank’s corporate coverage team — made the call. In the new model, technology executives defaulted to the platforms their engineering teams knew best. When your developer had been using Stripe’s sandbox since college, Stripe was the path of least resistance.

Embedded Payments Revolution

Perhaps no single trend accelerated the shift more profoundly than embedded payments. Independent Software Vendors (ISVs) — building point-of-sale systems, practice management software, e-commerce tools, and ERP systems — began integrating payments directly into their products. Instead of signing a separate merchant services agreement, a business owner simply “turned on” payments within software they were already using. By 2023, 54% of ISVs had embedded payment capabilities.

The Hidden Exclusivity Problem — As embedding payments became priority one for ISVs, exclusivity arrangements between software platforms and their payments partners proliferated. A merchant selecting an ISV would often discover — only after the fact — that they had no choice in payment processor. The ISV had a preferred or exclusive arrangement with a fintech or third-party gateway. Optionality decreased.

Morphing Card Brand Regs — Any honest accounting of this transformation must grapple with the role of Visa and Mastercard. The card networks set the rules for how the ecosystem operates — and throughout the 2010s, many of their fundamental rules were subtly rewritten in ways that disproportionately benefited fintechs.

Visa’s Consumer Bill Payment Service (CBPS) program is emblematic. Designed to allow third-party providers to aggregate bill payments on behalf of consumers, CBPS permitted a new “merchant-of-record intermediary” to emerge — a third party sitting between the cardholder and the actual biller, settling funds through its own bank account. The card brands’ dogmatic prohibition on aggregation quietly disappeared, and fintechs swarmed the opening. For regulated financial institutions, participation was constrained by compliance and risk considerations. For fintechs operating outside the traditional regulatory perimeter, it was an entirely new monetization avenue — with no systematic enforcement mechanism to keep them in bounds. The result was a lopsided playing field.

The Numbers Tell the Story

Marketplace commerce adds another dimension. Amazon, eBay, Etsy, and Shopify now account for over 50% of online transaction volume globally — and fintechs hold a disproportionate share of that infrastructure too. Banks are largely absent, not because they couldn’t compete, but because adherence to the strict card brand rules for marketplace oversight seemed like operational risk they didn’t need.

The AI Wildcard: The Next Chapter

If embedded payments lit the match for fintech dominance, the integration of payments behind AI commerce could be the gasoline that sets the whole thing ablaze.

Stripe has partnered with OpenAI since 2023, initially powering ChatGPT Plus subscriptions. In September 2025, the companies announced Instant Checkout — enabling ChatGPT users to purchase products from Etsy and Shopify merchants directly within the chat interface. Every major AI company in the Forbes AI 50 that accepts online payments does so through Stripe. As commerce begins to flow through AI interfaces at scale, the payment infrastructure embedded in those interfaces will capture the economics of that commerce.

What companies other than a giant fintech or two will have a meaningful presence in this layer? Will acquiring banks or ISOs play a role?

Maybe Banks Simply Chose Interchange?

There is a reasonable argument that banks ceding the acquiring business was not entirely accidental. The economics bifurcate sharply: interchange income, earned on the issuing side, flows to card-issuing banks on every transaction regardless of who processed the payment. Acquiring margins, by contrast, are thin and increasingly compressed.

It is at least plausible that some banks made a rational calculation: let the fintechs compete for acquiring market share, absorb the compliance burden and technology costs, while banks collect interchange on the other side. Whether this was explicit strategy or a rationalization after the fact is a debate for another time.

What if these same fintech giants build a path “around” interchange? Will real-time payment rails, account-to-account transfers, or digital wallet innovation bypass the old interchange construct entirely?

Slow Motion, In The Blink Of An Eye

The 15-year arc that disrupted bank acquiring in favor of fintechs happened in both slow motion and the blink of an eye and it’s not primarily a story of superior technology. It is a story of a banking industry distracted by other priorities post-2008 financial crisis, regulatory asymmetry, corporate complacency, and a US card network ecosystem that enabled — and in some ways incentivized — the sea change. In a very real sense, the payments world has shifted from being dominated by big banks to being monopolized by a handful fintechs. The concentration risk for merchants is the same as before — just different names on the door.

The biggest fintechs have become, in the payments space, what Google and Apple became in search and mobile: default infrastructure not because it was explicitly selected, but because it was already embedded.

The AI commerce layer, now emerging with these same fintechs at its center, is poised to increase their market lead.

For banks, the question is no longer whether the payments market ran off ahead of them. It did. The question is what their role will be in this new reality — and whether they’ll be satisfied operating as the invisible plumbing funding the very companies who displaced them?

Rich Toomey is Managing Partner at PayNimble. He has spent 20 years in the payments, banking, and fintech arena. Follow for more industry perspectives.