Closing the Back Door: Why Small Banks Must Own Payment Processing to Retain Commercial Clients

Regional and community banks have long competed against national giants by offering something the big box institutions simply can’t: personal service, local expertise, and a genuine relationship with the businesses they serve. But there’s a quiet vulnerability that too many small banks overlook—one that national players like Chase, Bank of America, Wells Fargo, U.S. Bank, Citi, and Fifth Third are aggressively exploiting: merchant services.

While a commercial client may deposit funds into your bank, if their credit card processing is handled by a competitor, that competitor has their foot in the door. And once that foot is in, they’re working hard to pull the entire relationship through it.

The Trojan Horse: When Processing Opens the Door to Poaching

According to a report from Accenture, 60% of small businesses would prefer to have all their financial services—banking and payments—with a single provider. That means if you don’t offer payment processing, you’re leaving the door open for someone else to fulfill that need—and eventually pull your customer away.

Big banks know this. Chase Payment Solutions, Bank of America Merchant Services, Wells Fargo Merchant Services, Fifth Third Bank’s Vantiv (now FIS), U.S. Bank’s Elavon, and Citi Merchant Services actively market to small and mid-sized businesses, not just to earn processing fees, but to convert those relationships into full-service commercial banking clients.

In fact, according to a 2023 survey by Mercator Advisory Group, 57% of small businesses who use a bank for merchant services also use that same bank for business checking. That number drops dramatically when merchant services are handled by a third-party. The conclusion? The processor often dictates where the primary banking relationship resides.

So, while your bank may still be receiving deposits, it’s your competitor who is controlling the revenue stream—and influencing where it eventually lands.

Big Banks Are Doubling Down on Payments

Over the last five years, national banks have significantly increased their investment in payments infrastructure as a strategy to win over commercial clients.

• JPMorgan Chase invested over $2 billion into their digital payments and merchant acquiring division in 2023 alone, focusing on enhancing their proprietary gateway, expanding e-commerce capabilities, and rolling out faster payment options.
• Bank of America continues to build out its integrated CashPro platform, which now combines treasury, merchant, and business banking tools into a single login experience, aimed directly at mid-market and growing commercial clients.
• Wells Fargo has been expanding its Control Tower and Vantage platforms to help businesses track and manage payments and cash flow in real-time.
• Fifth Third Bank—through their historic acquisition of Vantiv and partnership with FIS—has made merchant services a core part of their business banking portfolio, emphasizing bundled services for regional and multi-location businesses.
• U.S. Bank’s subsidiary Elavon processed over $450 billion in card volume in 2022, offering integrated payment solutions in travel, healthcare, and retail verticals—all tied into their commercial banking platform.

The strategic goal for all these institutions is clear: use payment processing as a wedge to deepen customer relationships, collect more data, control cash flow, and ultimately convert the full commercial banking relationship.

Integrated Payments = Stickier Relationships

By offering integrated payment solutions under your own brand—or with a trusted partner like Pavsti—you don’t just provide a needed service. You embed your bank deeper into your client’s day-to-day operations.

A study by J.D. Power revealed that small businesses using three or more services from the same financial institution report 50% higher satisfaction and significantly lower attrition. In contrast, businesses juggling multiple providers often feel disjointed, unsupported, and more likely to churn.

Offering in-house merchant services also strengthens your deposit base. When your bank controls the processing relationship, settlement funds land directly in your accounts, increasing low-cost deposits and giving you more insight into client cash flow.

Technology Isn’t a Barrier—It’s an Opportunity

You may be thinking, "But we don’t have the resources to build a full-scale payments infrastructure." That’s where strategic partnerships come in.

Working with a provider like Pavsti allows you to offer enterprise-grade payment solutions—modern APIs, omni-channel terminals, seamless onboarding—without the operational burden. Your bank stays front and center, while Pavsti powers the experience behind the scenes.

The result? Your business clients get the tools they need. You get the credit, the deposits, the revenue share—and most importantly, you retain the relationship.

Final Word: Stop Handing Your Clients to Competitors

Big banks are leveraging merchant services as a stealth weapon to win over your clients. Don’t let them.

By integrating payment processing into your core offering, you close the back door, deepen customer loyalty, grow your deposits, and protect your commercial portfolio. It’s not just smart business—it’s strategic defense.