The Merchant Attrition Problem
Merchant attrition has plagued the payments industry for years and is responsible for significant revenue losses. This is due in large part to the fact that it takes three new merchants to replace the revenue from a single lost account. To put this into perspective, over 20 percent of merchants are expected to leave their current merchant acquirer or independent sales organization (ISO) every year – that’s 1 in 5 of your current accounts (Goldman Sachs 2016). In terms of dollars and cents, it is estimated that merchant attrition costs the payments industry billions of dollars annually.
Despite this stark reality, the industry has failed to implement strategies that mitigate this problem. Many still rely on old-school techniques like using reports that track the general characteristics of merchants who jumped ship. These reports provide minimal help and are a reactive approach to the problem. Another failed tactic is calling customers who have already left the processor, which, of course, wastes the precious time and energy of an already overwhelmed retention team. Needless to say, these traditional approaches have an extremely low success rate. With competition on the rise, simply waiting for the merchant to stop processing before reaching out is no longer a viable option.
Using Data to Identify Problems Before They Occur
The future of successful retention lies in the ability to leverage data and technology to accurately calculate which merchants will leave. In other words, payment processors can leverage their vast amounts of data, along with predictive analytics, to identify at-risk merchants. By doing this, companies can utilize a proven technology that yields far better results than the current industry standard. However, identifying the problem is only the first step to mitigating attrition.
Personalized Solutions
Once an at-risk merchant has been identified, retention teams ought to look at the specific drivers causing merchant attrition. By doing so, acquirers can reach out to their clients and create personalized strategies or solutions that solve their pain points.
Retention tactics can range from providing a better POS, offering “stickier” programs such as surcharge or simply going beyond the payments call to solve other immediate problems. Perhaps the merchant is having difficulties selling online or lacks a marketing team altogether. For instance, merchants with NFC are 5% less likely to leave than merchants without NFC. Additionally, merchants with an online presence are 2% less likely to leave than merchants without an online store.
Whatever the case, acquirers need to go beyond their immediate offerings and become creative when it comes to solving a merchant‘s problems. Only by doing so can the relationship between merchant and acquirer be strengthened and thus, decrease the probability of a merchant leaving.
The Future of Retention
The future of retention lies in the ability of acquirers and ISO’s to be proactive. One way to do so is by leveraging customer data in order to identify potential problems before they occur. From there, one can begin to strategize and create personalized solutions for unhappy merchants. However, if acquirers are not willing to engage in a productive conversation with their merchants and provide solutions to their problems, chances are the competition will be all too willing to fill the void with lower fees and shiny perks.
If you think this process might work for your organization, we’d love to hear from you! Please visit our site at www.arcum.ai or email us at info@arcum.ai and let us know how we can help.
