The Merchant Acquiring Land Grab Is Over. Now Comes the Margin Squeeze.

Between 2022 and 2025, acquirers across Nigeria, Ghana, and Kenya put an estimated 2.9 million payment terminals into merchant hands, most of them subsidized to zero or near it. The land grab worked: card and wallet acceptance at small merchants roughly tripled. The economics did not follow.

Merchant discount rates have compressed from an average 1.6% to about 0.9% in Nigeria over the same period, according to figures from three acquirers reviewed by Afrikons, while terminal costs, agent commissions, and chargeback handling have not moved proportionally. At least two mid-sized acquirers are now operating at negative unit margin on their small-merchant book and funding it from larger accounts.

"We taught two million merchants that a terminal is free and switching is free, and then acted surprised when they behaved accordingly," said an executive at a Lagos acquirer, speaking on condition of anonymity because the company is in a sale process. "Every one of our competitors has the same problem and none of us can be the first to charge."

The likely resolution is consolidation, and bankers say at least four processes are live. The alternative — moving up the stack into lending, working capital, and inventory software, where the margins actually are — is the strategy everyone describes on investor calls, and the one almost nobody has executed at scale.