Why More Community Banks and Credit Unions Are Offering Merchant Services
Yonas Marcos, CEO
Star Financial Services
Community banks and credit unions don't need an in-house payment operation to offer merchant services. With the right partner, they can better serve business account holders, deepen relationships and generate recurring non-interest income.
A small business owner in Rockville, Maryland, had a problem that will sound familiar to a lot of merchants.
His payment processing fees kept going up.
Every increase took another bite out of his margins, so he shopped around, found a less expensive merchant services provider and switched. Then the costs started creeping up again.
So, he started looking for a better deal.
His experience isn't unusual. PYMNTS Intelligence research found that 15% of Main Street small businesses said they were likely to switch payment processors within the next three years. Among businesses considering a change, price matters: 59% said lower transaction fees would motivate them to switch, while 42% cited ease of use.
But shopping for merchant services wasn't simple. Comparing offers wasn't always apples to apples. A lower advertised rate didn't necessarily mean a lower overall cost once transaction fees, monthly fees, equipment costs, PCI compliance fees, chargeback fees and contract terms were considered.
And every switch brought disruption. Employees had to learn a new system, procedures changed and there were new people to call when something went wrong.
Then he received an email from his credit union announcing that it was offering merchant services.
That caught his attention.
He trusted his credit union. Instead of starting another search, comparing another stack of offers and reading more fine print, he felt confident his credit union had done its homework before putting a provider in front of its business account holders.
The pricing was competitive. The service made sense. He made the switch.
For the Maryland retailer, his credit union hadn't simply offered another service. It had made a complicated decision easier.
For the credit union, it was an opportunity to become a more valuable part of that business relationship.
Your Business Account Holders Already Need This Service
Your business account holders are already accepting debit and credit cards. That means they're already paying someone to process those transactions.
The question is: Are they getting that service from you or somewhere else?
For many small businesses, it's somewhere else. According to Datos Insights, more than 60% of small businesses go beyond their primary financial institution for payment capabilities.
That's a significant opportunity for community banks and credit unions.
For years, merchant services have been closely associated with large financial institutions. Open a business account with almost any major bank, and payment processing is likely to be part of the conversation. But there's no reason community financial institutions can't offer their business account holders the same type of service.
And they don't have to build a merchant processing operation in-house to do it.
More recent Datos Insights research reinforces the opportunity. Its 2025 study of 1,004 U.S. small businesses found gaps between the financial services small businesses need and what their financial institutions currently provide, including payment modernization and workflow integration. When financial institutions don't meet those needs, businesses may look elsewhere.
Offering merchant services gives a community bank or credit union an opportunity to keep more of that relationship under one roof. Business account holders get another service they already need from a financial institution they know, while the institution becomes a more valuable partner to the business.
For community banks and credit unions throughout Washington, D.C., Maryland and Northern Virginia, it's another way to expand business banking services while maintaining the local relationships and personal service that set community financial institutions apart.
Strengthening the Business Relationship
Let's go back to our Rockville business owner.
When his business grew and he decided to open a second location in Tysons, Virginia, merchant services were one less thing he had to figure out.
He didn't have to start searching online, compare another group of processors, read another set of contracts or try to determine which offer was actually the better deal. He already had a relationship through his credit union.
The credit union and its merchant services partner already understood his business and processing needs. Getting the new Virginia location set up was easier because the relationship was already there. Training was easier, too. Employees from his Maryland location already knew the system and could help get the new team up to speed.
That's where the value becomes bigger than processing transactions.
The credit union had been there when the business owner needed help solving a problem. When his business expanded across state lines, it was there again, making that growth a little easier.
That's what community financial institutions do particularly well. They build relationships. Adding merchant services simply gives them another way to build on them.
And There's Another Benefit: Recurring Non-Interest Income
There's a financial benefit for the community bank or credit union, too.
Every day, business account holders are processing transactions and paying for that service. A merchant services program gives community banks and credit unions an opportunity to participate in that revenue stream.
Unlike lending, it doesn't require the institution to extend additional credit. As businesses process transactions, the program can generate non-interest income month after month.
For community banks and credit unions looking to diversify revenue, that's an attractive combination: offer a service businesses already need, deepen existing relationships and create an additional source of recurring income at the same time.
You Don't Have to Become a Merchant Services Provider
This is where I think some community-based financial institutions hesitate.
Offering merchant services doesn't mean you have to build a merchant services department. You don't have to become an expert in payment processing, buy the technology or add another operational burden to your staff.
You just need the right partner.
I've spent years working with community banks and credit unions on their ATM programs, and I've seen what happens when too many vendors are involved.
Something goes wrong and everyone owns one piece of the problem.
One company handles the equipment. Another handles processing. Someone else provides support. The financial institution's employees end up making calls, sending emails and trying to figure out who is responsible for fixing it.
The same thing can happen with merchant services.
That's why the partner matters.
Your merchant services partner should provide the technology and processing expertise, help onboard business account holders, offer competitive and transparent pricing, and provide support when a merchant needs it.
Most importantly, that partner needs to understand whose relationship they're supporting.
When your financial institution recommends a merchant services provider, you're putting your reputation behind that provider. Every interaction they have with one of your business account holders reflects on you.
At Star Financial Services, we already work with community banks and credit unions throughout Washington, D.C., Maryland and Northern Virginia on their ATM programs and, increasingly, their merchant services programs. That experience gives us a firsthand understanding of how important accountability is when you're supporting a financial institution's relationship with its business account holders.
I've become a believer in a very simple idea:
One contact. One accountable relationship.
When something goes wrong, there shouldn't be three numbers to call and three companies pointing at one another.
There should be one call.
And someone should answer.
That's what we do.
Interested in offering merchant services to your business account holders? Contact Star Financial Services to learn how we can help you strengthen business relationships and create a new source of recurring non-interest income.
Yonas Marcos is CEO of Star Financial Services, a Maryland-based ATM outsourcing provider serving community banks and credit unions throughout Washington, DC, Maryland and Northern Virginia.
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