High Costs And Fraud Risk Drive Sellers’ Dissatisfaction With Card Processing, J.D. Power Finds

Small businesses tend to be less satisfied with their credit and debit card processing than they are with processing for alternative payments, according to a study by J.D. Power.

Based on a 1,000-point scale, with 1,000 being the highest score, merchant-satisfaction scores for credit card processing averaged 692, while scores for debit card processing averaged 694. By contrast, the merchant scores for buy now, pay later transactions averaged 744. That score rose to 793 among the 4% of small businesses that accept at least six different payment types.

J.D. Power surveyed 5,383 small-business customers of merchant-service providers, measuring satisfaction across six categories: advice and guidance on running their business; cost of processing payments; data security and protection; managing their account; payment processing; and quality of technology. The study was conducted from September through November 2023.

Key reasons as to why satisfaction scores for credit and debit card processing are lower than those for alternative payments include higher acceptance costs and higher fraud risk.

“The merchants having debit and credit payment types processed have the largest point gaps in satisfaction in the areas of cost of processing payments and advice and guidance [from their processor] on running the business,” John Cabell, managing director of payments intelligence for J.D. Power, says by email. “These are the largest point gaps among all the customer-experience dimensions, which are all lower for debit/credit. In effect, the entire experience appears to be less satisfying, but is led by gaps in cost and advice.”

Acceptance costs and fraud risk were also key factors among merchants who were unwilling to accept credit and debit cards, according to the report.

On the other hand, small-merchant satisfaction is higher for the processing of alternative payments because of lower acceptance costs and better advice from processors on ways to run a business. Many of the merchants giving higher satisfaction scores for the processing of alternative payments tend to be younger and newer business owners who are likelier to accept alternative payments, J.D .Power says.

“[Alternative] payment types tend to garner higher satisfaction in all areas, led by cost and advice,” Cabell says. “It is also notable that these payment types tend to be more prevalent among innovator merchants, whose engagement and satisfaction with their provider is high with the increased variety of payment types they accept.”

While J.D. Power does not have year-over-year satisfaction scores when it comes to payment processing—due in part to a redesign of the study for 2024—the company does say that, since the pandemic, merchant satisfaction increased significantly through 2023.

“The 2024 Net Promoter scores (likelihood to refer) are trend-able, however, and show a plateau over the past three years,” Cabell says. “Although NPS differs slightly from satisfaction, this plateau likely means that merchant satisfaction is also relatively stable from 2023 to 2024.

Among processors, e-commerce giant Shopify Inc. ranked highest with a score of 728, followed by Paysafe Ltd. (725), Bank of America (719), FIS Inc. (710), and Wells Fargo Merchant Services (708). The average satisfaction score for individual processors was 688.