The payments industry is changing rapidly, and small business owners could soon have fewer—but more powerful—choices when it comes to payment providers. As payment companies race to add technology and broaden their capabilities, consolidation is accelerating across the industry. Stripe’s reported $53 billion bid for PayPal is the latest—and biggest—example of that trend. I talked with Louis Hoch, the Chairman, CEO, and co-founder of Usio, a certified fintech leader directing the movement of over $8 billion annually, about what these changes mean for small businesses and what owners should look for when choosing a payment provider.
More Than a Mega-Deal
Rieva Lesonsky: Stripe’s reported bid for PayPal is making headlines. Why do you believe this deal is about more than just two major payment companies?
Louis Hoch: I believe the reported bid reflects a much larger transformation taking place across the payments industry. Payments are evolving from a standalone service into an integrated layer of software-driven commerce.
We’re seeing businesses expect payments, invoicing, reporting, fraud prevention and other financial services to work together within the software they already use. Stripe brings extensive merchant and software-platform relationships, while PayPal brings a major consumer network, Venmo, and a globally recognized digital wallet. A combination would connect more of that network under one roof.
Whether the deal ultimately closes or not, it shows us where the industry is heading. The companies positioned to lead will control more of the technology, data, and customer experience surrounding transactions, rather than solely processing them.
Lesonsky: You say this acquisition could signal a wave of consolidation across the payments industry. What’s driving that trend?
Hoch: We’re seeing several forces converge. Modern payment infrastructure is expensive to build and maintain. Providers must continually invest in cybersecurity, regulatory compliance, fraud prevention, AI, cloud architecture, and new payment methods. At the same time, merchants expect faster onboarding and a more unified experience.
PayFac is also changing the industry’s economics by allowing software companies to incorporate payments directly into their platforms. That gives them greater ownership of the merchant relationship and creates opportunities to offer additional financial services.
In that environment, acquisitions can be a faster way to gain technology, customer relationships, or specialized capabilities than building everything internally. Scale helps support the required investment, while specialization gives larger providers access to valuable industries and markets.
What Consolidation Means for Small Businesses
Lesonsky: How could consolidation among payment providers affect small businesses? Are there potential benefits as well as drawbacks?
Hoch: There are benefits on both sides. We could see small businesses gain access to better-integrated technology, stronger fraud controls, more payment options, and faster financial services. Capabilities that were once available mainly to large organizations can now be delivered more readily through the software small businesses already use.
The tradeoff is that consolidation can reduce choice. A larger provider may offer more features but less flexibility, or more standardized service and less personalized support. If one company handles every part of a business’s financial workflow, switching providers may also become more difficult.
My advice to small business owners is to focus on whether a larger platform is producing genuine operational improvements for their businesses, rather than a longer list of features.
Choosing the Right Payment Partner
Lesonsky: Many small business owners simply want payment processing that is secure, affordable and reliable. As the industry consolidates, what should they be paying attention to?
Hoch: I would encourage business owners to evaluate the total value of the service, not just the advertised processing rate. That includes all fees, funding speed, security, system reliability, contract terms, software integrations, and the quality of support available when something goes wrong.
We’re also seeing data and flexibility steadily become more important. Business owners should ask whether they can access and export their transaction data, accommodate new payment methods and change providers without significantly disrupting their operations.
A payment system is part of a business’s essential infrastructure. The best provider is the one that can protect revenue, support customers and resolve problems without disrupting cash flow.
The Next Wave of Payments
Lesonsky: AI, embedded finance, and digital wallets are reshaping the payments landscape. Which of these developments will have the greatest impact on small businesses over the next few years?
Hoch: I believe embedded finance will have the most visible impact because it brings payments and other financial capabilities directly into the software businesses use every day. Instead of coordinating separate systems for scheduling, invoicing, payment acceptance, reporting and payouts, a small business may be able to manage that entire workflow from a single operating environment.
We’re also seeing AI and digital wallets become important components of that ecosystem. AI can improve fraud detection, automate administrative work and help businesses make better use of their transaction data. Digital wallets give customers faster and more convenient ways to pay.
Ultimately, the biggest change will not come from any one of these technologies in isolation. It will come from the way they work together, with payment serving as the entry point to a broader set of business and financial tools.
Lesonsky: Do you expect consolidation to lead to more innovation, or could it reduce competition and limit choices for merchants?
Hoch: I expect it to do some of both. Larger platforms have the capital and customer scale to invest in sophisticated infrastructure and distribute new capabilities quickly. Bringing complementary technologies together can also create a smoother experience for businesses.
At the same time, we often see specialized providers identify and solve needs that larger, general-purpose platforms overlook. If consolidation eliminates too many of those alternatives, merchants could lose flexibility, personalized service and negotiating power.
I believe the healthiest market will include major platforms capable of making large infrastructure investments alongside specialized providers that compete through expertise, adaptability and service.
Should You Switch Providers?
Lesonsky: What questions should business owners ask before switching payment providers or evaluating new payment technologies?
Hoch: I would start with the practical questions:
- What will the service cost in total, including recurring, incidental and termination fees?
- How quickly and reliably will funds reach my account?
- Does it support the payment methods my customers prefer?
- How does the provider address security, fraud and chargebacks?
- Will it integrate with my existing accounting and business software?
- What support is available if a payment fails or funds are delayed?
- Can I access and export my transaction data?
- How difficult would it be to switch providers in the future?
Most importantly, business owners should ask what problem the technology will solve. We see many new capabilities enter the market, but “new” does not necessarily mean “useful.” A solution should improve cash flow, reduce administrative work, lower risk, or create a better customer experience.
Lesonsky: Some smaller payment companies may choose to specialize rather than compete on scale. Could that actually benefit small businesses looking for more personalized solutions?
Hoch: Absolutely. We are seeing specialized PayFacs, vertical software providers, and niche processors focus on industries such as healthcare, education, property management, and professional services.
These companies often understand the workflows, compliance requirements, and customer expectations of a particular industry more deeply than a general-purpose provider. That expertise can translate into better integrations, more relevant features and more responsive service for small businesses.
Smaller providers still need to demonstrate strong security, reliability and financial stability. But in my experience, scale is not the only source of value in payments. For many businesses, a provider that understands exactly how they operate can be more valuable than one offering every possible feature.
Preparing for the Future
Lesonsky: If you’re advising a small business owner today, what’s the one thing they should do to ensure their payment systems are ready for the next wave of change?
Hoch: My advice would be to choose for flexibility. None of us can predict exactly which payment method or technology will become essential several years from now, but business owners can avoid becoming trapped in a closed system that is difficult to update.
They should look for a payment platform that supports integrations, multiple payment methods, and access to useful transaction data. It should also be able to grow with the business without requiring the owner to rebuild the entire technology stack.
I would also encourage business owners to review their payment systems regularly, just as they would other essential business infrastructure. Waiting until a system fails or their customers become frustrated limits the options available to them.
Lesonsky: For the average small business owner, what are the biggest mistakes people make when choosing a payment processor? What should they prioritize instead?
Hoch: The most common mistake I see is choosing a processor based entirely on the lowest advertised rate. A small difference in transaction pricing can quickly be outweighed by unexpected fees, delayed funding, weak integrations, unreliable technology, or poor customer support.
Another mistake is purchasing more technology than the business actually needs. We’re seeing payment platforms expand their capabilities, but more features don’t automatically create more value. A complicated system can add costs and administrative work without improving the customer experience.
Business owners should prioritize transparent pricing, security, dependable funding, ease of use, and responsive service. They should also consider whether the provider understands their industry and can adapt as the business grows. The right payment partner should reduce operational friction, not add another layer of it.
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo courtesy Getty Images for Unsplash+
