Payment processing is often viewed as a commodity because in the majority of cases the service characteristics are undifferentiated. The technologies used and the services offered are often quite similar making it relatively easy for a merchant to move from one provider to the next. This can result in a scenario where merchants move from provider to provider securing ever decreasing rates as they go.
Good news for merchants, not so good for acquirers who primarily view growth in processing volumes as a key success factor but face attrition rates of up to 20% year-on-year. Looking at the global annual cost of merchant attrition, which includes lost revenues and the cost of recruiting new merchants to replace those lost, it adds up to a whopping $2.3 billion* annually.
Decrease costs by focusing on existing customers while at the same time boosting your value proposition for new customers
It is well known that retaining customers is far less costly than recruiting new ones, in fact, according to a report by Frederick Reichheld of Bain & Company, it is 6 to 7 times more costly. Changing your customers’ perception of you as a service provider to that of a business partner and business enabler can help to reduce attrition rates and therefore, decrease the costs associated with replacing those customers.
There are many ways that acquiring organisations can differentiate their services from other providers including investing in emerging technologies, partnering with innovative organisations, and by providing a wide range of value added solutions.
While the majority of larger merchants often have an assigned relationship manager who interacts with them on a regular basis providing advice and assistance on the right technologies and solutions for their business, the difficulty often lies in communicating and engaging with small to medium sized businesses, who typically contribute higher gross margins and who combined represent a significant percentage of processing volumes.
These merchants generally have a much higher rate of attrition and don’t usually interact with their acquirer unless they need; quite often that can be when they are closing their merchant account.
How to build better relationships with your small to medium sized merchants
Changing your small to medium sized merchants’ perception of you is not an easy task, but just as you work hard to retain your larger merchants it is also important that you work to build lasting relationships with smaller merchants so that overall attrition costs can be reduced. The following can help to achieve this;
- Maintain your customers’ contact details. Ensure that you have up-to-date name, address, e-mail and phone numbers for each merchant so that you can contact them via multiple channels.
- Understand your merchants’ business set-up. Businesses grow and change direction over time, it is therefore vital that your merchant records are kept up to date to reflect the current business set-up rather than what it was when they first signed-up.
- Tailor your value-add services to meet the individual requirements of your merchants. Promoting services that are not applicable to certain business types is not only wasteful but can also be irritating to merchants who see it as proof that you don’t understand their needs.
- Engage your merchants in a way that suits them. Smaller business owners don’t want to be bothered when they are busy running their business, so when they choose to engage with you make sure you take full advantage of that opportunity offering them tailored solutions that help them to grow their business and increase sales.
- Create a great on-line user experience for your merchants. Most small merchants interact with their acquirer on-line, whether it’s to view their merchant statements, check chargeback status or manage their PCI DSS requirements. Having multiple portals for these different requirements can be very frustrating for merchants so providing a single unified portal that meets all of your merchants’ needs and one that enables tailored, relevant interaction is a must.
* U.S. Merchant Attrition Study, Aite Group, 2012. As reported in Discover® Merchant Predictor Model, 2013
Sysnet’s compliance management and merchant engagement solution Sysnet.air® builds and supports mutually beneficial relationships between small-to-medium sized businesses (SMBs) and their acquiring organisation through the provision of targeted products and solutions that help those SMBs to improve their business by reducing costs and increasing revenue.
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