As lenders face increasing pressure to optimize costs and improve authorization rates, the structural conflicts built into traditional payment processing relationships have never been more expensive.
Lenders evaluating payment processing partners typically focus on rates. A quarter point here, a few cents there. This focus obscures what actually determines whether payment infrastructure helps or hinders business operations.
The more important question: whether a payment partner's incentives, technology, and flexibility align with how a lender's business operates, or whether structural misalignments create ongoing friction.
In analyzing payment infrastructure for more than 50 lenders over the past three years, I've found that processors' banking commitments average $30-75 million in monthly volume requirements. These commitments create constraints that shape every recommendation processors make, often in ways that work against client interests.
Traditional payment processors operate on a model built around banking relationships, proprietary technology, and volume commitments. The model itself presents no inherent issues. The complications arise in how these commitments shape what processors can offer clients.
Processors with minimum volume requirements at specific banking partners need client transactions flowing through particular channels. Whether those channels serve the client best becomes secondary to meeting volume commitments. Legacy technology stacks built for earlier lending paradigms create technical debt that clients inherit. When processors own both technology and banking relationships, switching costs function as retention mechanisms.
Processors succeed by maintaining client lock-in. Clients succeed by maintaining optionality. These incentives don't naturally align.
An agnostic payment partner has no horse in the race beyond your success. They don't need you to process through Bank A to meet quarterly commitments. They don't need you to use their proprietary gateway because that's where their margins live. They don't need you to stay because leaving would be painful.
This independence changes every conversation. When you ask whether ACH or card makes sense for a particular customer segment, the answer comes from data, not from which option benefits the processor. When you need to add a new payment method, the recommendation reflects what integrates best with your systems, not what keeps you dependent on theirs. When something goes wrong with your current banking relationship, you have options instead of ultimatums.
Legacy payment infrastructure was built for predictable, high-volume, low-risk transactions. Traditional retail, established e-commerce brands, the kind of processing where disputes are rare and authorization rates aren't a concern.
Lending operates differently. Your customers have complicated financial lives. Transaction patterns don't follow retail norms. Compliance requirements evolve constantly. Your risk profile demands nuance, not broad categorizations that treat every high-risk merchant the same.
Modern payment technology handles this complexity. It provides granular data that helps you understand not just what happened, but why. It offers flexible routing that optimizes for your specific success metrics. It integrates with your systems instead of forcing you to build around its limitations.
Processors invested heavily in legacy systems have every incentive to keep you on those systems. The switching cost isn't just yours, it's theirs too. So they'll tell you the old way works fine, because for them, it does.
Large bank minimums create a particular kind of dysfunction. When your processor needs $X million in monthly volume through a specific banking partner, your business decisions become hostage to their commitments.
Testing a new payment method that might cannibalize existing volume becomes a problem. Shifting transactions to a different processor for better rates on a specific product threatens their minimums. A hybrid approach that optimizes across multiple channels creates complexity they'd rather avoid.
These constraints rarely surface in sales conversations. They emerge later, when you're trying to evolve your payment strategy and discover that evolution threatens your processor's banking relationships.
An agnostic partner with diversified banking relationships doesn't have this problem. They can recommend genuine optimization because they're not protecting volume commitments. They can support hybrid approaches because they're not worried about cannibalization. They can help you test new methods because your experimentation doesn't threaten their business model.
I've watched this play out enough times to recognize the pattern. A lender calls because their authorization rates dropped on a specific customer segment. If they're working with a captive processor, the conversation centers on tweaking settings within the existing system. If they're working with an agnostic partner, the conversation starts with data: which banking relationship would handle this segment better? Should we route these transactions differently? What does the performance data actually tell us?
The difference isn't dramatic in any single instance. It's the accumulation of small decisions made with different constraints. Your captive processor optimizes within their system because that's what they have to work with. Your agnostic partner optimizes across systems because that's what serves you best.
This gap widens over time. You outgrow your current setup, as most growing lenders do. An agnostic partner helps you build what comes next based on where your business is headed. A captive processor sells you the next tier of what you already have, because their business model depends on keeping you in their ecosystem.
I'm not saying captive processors are incompetent or malicious. I'm saying their structure creates predictable constraints on what they can recommend. Once you see those constraints clearly, you can decide whether they matter for your business.
A few direct questions typically reveal where a processor's interests lie.
Ask for rate comparisons against market alternatives. Agnostic partners have no reason to obscure competitive options since their value doesn't derive from information asymmetry. Captive partners deflect.
Ask what happens when you need to move volume to another processor. Agnostic partners expect to remain valuable without exclusivity and will help structure transitions. Captive partners explain why such moves create complications.
Ask about banking partners and volume commitments. Agnostic partners maintain diversified relationships without single dependencies. Captive partners carry obligations that constrain what they can recommend.
These questions require no technical sophistication. They simply acknowledge that processor interests and client interests don't automatically converge.
Lenders working with processors whose business models create structural conflicts don't need to replace their entire payment infrastructure. They need better data.
A comprehensive payment analysis should account for actual transaction mix, volume patterns, and risk profile, plus soft costs: developer time working around platform limitations, customer service managing payment failures, revenue opportunities passed on due to infrastructure constraints.
Testing a secondary banking relationship on a defined subset of volume - a new product, specific customer segment, or poorly-supported payment method - quickly reveals whether existing constraints reflect technical realities or business model artifacts.
Direct questions about banking commitments and how those commitments affect available options should produce direct answers. Processors unable or unwilling to discuss minimums, technology roadmaps, or optimization outside their ecosystem provide clarity through evasion.
Some lenders recognize the misalignment and maintain existing relationships anyway. Switching costs are real. Institutional relationships carry weight. The decision simply needs to be conscious rather than default.
The payment processing landscape has changed substantially in recent years. Options that didn't exist five years ago are now readily available. As economic pressure forces lenders to scrutinize every basis point and optimize every operational process, payment infrastructure that worked "well enough" a few years ago increasingly shows its limitations.
Most lenders who calculate what processor misalignment actually costs them annually discover it's more than they expected. The question facing the industry now: whether lenders will demand the structural changes necessary to align processor incentives with their own success, or whether the status quo remains entrenched until market forces make it untenable.
The processors who recognize this shift and restructure accordingly will be well-positioned. Those who don't may find their client relationships increasingly vulnerable to partners whose business models allow them to put client interests first.
Debra LeJeune is CEO and Founder of Integrity Payments Group, which advises lenders and fintech companies on payment infrastructure strategy. She has more than 20 years of experience in payment processing and has worked with clients ranging from regional lenders to national platforms.