Paying Attention to Retention

Keeping merchants is equally as important as adding new ones. But what to do when existing ones are ready to grow and look elsewhere?

Merchant attrition is one of the constants in acquiring; so too are efforts to retain merchants. The effort put into retention is vital, especially for merchants that are growing and need new services to handle their payments evolution. The challenge is identifying merchants considering a switch and lining up the products and services that can convince them to stay.

Some acquirers take a preemptive approach. A key market for Aurora Payments, a Las Vegas-based payments company, is nail and beauty salons, says chief executive Brian Goudie.

“A significant portion of the salons in the U.S. are operated by Vietnamese-speaking business professionals,” Goudie says. “Therefore, we decided to train dedicated support staff based in Vietnam who can help our merchants in their native language. This way, as these Vietnamese-American businesses grow, they never have to worry about understanding our technology support.”

Taking that step may be an easily recognized way to help these merchants. But acquirers make data, along with qualitative measurements, a central component of monitoring merchants for growth—and for any volume changes—to ferret out indicators of attrition.

As Goudie explains, Aurora Payments tracks many data points in its portfolio to identify growth merchants. “The obvious data point is monthly processed volume, which identifies growing merchants,” he says. “We also track month-over-month yield and the number of products and solutions being used per merchant, and based on a combination of those factors, we have a ‘Premier Merchant’ notation in our [customer relationship management software].”

Data is also a primary tool at Swipesum, a St. Louis-based payments provider. “We use a data-driven approach through an in-house analytics platform that tracks trends and growth patterns among our merchants,” says Michael Seaman, Swipesum chief executive and founder.

“Coupled with dedicated account managers for our key clients, we identify which merchants are growing, and preach proactive engagement to our team,” Seaman continues. “We don’t sit back and wait for signs of churn because, by that time, it’s too late. Instead, we actively engage and strategize with growing merchants to ensure they’re continually supported with the right tools and services.”

Monitoring Growth

Key indicators of potential churn include a jump in transaction volume, expansion notifications into new markets, and a growing need for additional services, says Kyle Hall, chief executive at PayKings, a St. Petersburg, Fla.-based payments provider.

“Regular check-ins help us catch these changes early, so we can offer the right solutions as they grow,” Hall says. “A proper system with alerts to monitor merchants’ growth is crucial as a portfolio scales.”

Smaller independent sales organizations, too, can take steps to monitor churn, says Perry Tatooles, director of payments strategy at TSG, an Omaha, Neb.-based payments consultancy. Sound support and communication measures are essential, he says. “Often, smaller ISOs are so busy generating new merchants they can start to feel the attrition,” Tatooles tells Digital Transactions, “especially if they don’t have a very differentiated product.”

Payments Giant J.P. Morgan

Payments makes attrition a priority, too. “In our small-business segment, where attrition can occur frequently, we look more closely at same-store sales as an indicator of the health of our portfolio,” says Mike Lozanoff, the processor’s global head of merchant services. “Given the breadth of JPMorganChase, our relationship-management coverage across regions also allows us to check in with our clients on the opportunities and challenges they are facing.”

Having differentiated products and services can be one tool to help retain growing merchants. That is important because many merchants, especially smaller ones, are looking for more do-it-all applications, he says.

Most small businesses are leaving one technology for another that has a better-suited point-of-sale management service. The result is that the payments component can be deprecated in terms of perceived value. “The line between payments and technology is completely diminished,” Tatooles says.

As that line blurs, payments providers must constantly evaluate their product inventory. “We continuously evolve our product strategy to stay aligned with our merchants’ needs,” Rob Gatto, chief revenue officer at Paysafe Ltd. “Through regular discussions, we carefully listen to merchants’ strategies to identify potential gaps and track industry trends, ensuring our offerings are at the forefront of emerging demands.”

Gatto says Paysafe’s approach is centered on strategic cross selling within its merchant base. This effort can include helping merchants expand into new geographies or new states, as gambling operators might desire. “Growing merchants prioritize providing consumers with the full spectrum of preferred payment methods,” he says.

‘Surgical’ Offerings

What sort of payments and related tools help? Aurora Payments’ use of support staff who can speak Vietnamese for part of its customer base is one example. Another is access to working capital. Another, as Goudie suggests, is to have fraud and risk reduction services that cater to card-not-present merchants.

“Simply put, what an e-commerce client needs versus what a hair salon needs is different, and the more surgical one can be with the offering, the more successful you will be with attachment and bringing value to that client,” Goudie says.

For PayKings, potential attrition was halted when a yacht charter company was expanding globally and needed multicurrency support, Hall says.

“Their current payment partner couldn’t provide the functionality they needed, leaving them at risk of losing international business,” he says. “To address this, we quickly arranged a gateway integration over the weekend, building a custom solution that connected another processor directly into their booking software. This seamless setup allowed them to accept payments in various currencies without interruption, keeping them competitive and fully supported as they scaled.”

At Clearent by Xplor, a St. Louis-based payments provider that specializes in working with software-as-a-service platforms, retention can get a boost from reviewing a client’s merchant statement. That’s what happened with one 200-location client, says Mark Passifone, Clearent by Xplor senior vice president of integrated payments.

“The service provider was receiving downgrades on their monthly statements and paying large fees because certain HSA cards were not processing properly,” Passifone says. “We made immediate adjustments to the tech stack that allowed the service provider to process those cards in a way that eliminated over $8,000 worth of expense each month in processing fees and retaining the merchant.”

Sometimes, loading up a merchant with a variety of payments services may not yield the desired outcome. Lozanoff recalls a J.P. Morgan Payments client that looked for more service.

“Recently, we had a merchant that was exploring additional providers to optimize their processing and value-added services stack.  After multiple discussions, the merchant found it was a better outcome for them to simplify their operations, remove the complexity of multiple providers, and consolidate more of their payments stack with J.P. Morgan Payments,” Lozanoff says.

An Open Dialog

Payments companies also may help cut their churn rates from the get-go by ensuring their merchants are well-suited to their payments services, suggests Seaman. “One major driver of churn in this industry is bringing on merchants who aren’t ideally suited for a solution in the first place, often due to short-sighted sales tactics,” he says.

“While the salesperson might hit a quote and these merchants boost revenue in the short term, they tend to result in increased churn,” he continues. ”We stay focused on working with clients who genuinely benefit from our services, which transforms churn from a metric to worry about into one we can celebrate.”

Tatooles says retention is best aided by knowing the merchant and being diligent about reviewing its payments and operational activities. “The hardest part of retaining a merchant is getting them to talk to you,” he says. “If you never have people talk to them, you never have an opportunity to retain them.”

Merchants who call to disclose they are switching signal to the provider an opportunity to convince them to stay. “It’s having that dialog and that open, honest conversation,” Tatooles says.