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Table of Contents

Lead Story

Capital flow in acquiring


Industry Update

PCI SSC steps up data security education

MasterCard on target with first quarter gains

Money and tech conference focused on mobile


Research Rundown

Selling Prepaid

Prepaid in brief

Gift card regs unraveled

The debate over rebates


Deregulation, regulation and you

Patti Murphy
The Takoma Group

Payments 2010: The revolution has arrived

Brandes Elitch
CrossCheck Inc.

Stemming the attrition tide

Biff Matthews
CardWare International


Street SmartsSM:
High risk, high reward

Ken Musante
Eureka Payments LLC

Outsourcing customer support? Think again

Nicholas Cucci
Network Merchants Inc.

Residual protection at 'portability moments'

Adam Atlas
Attorney at Law

Succeeding at PCI compliance - Part 1:
Planning the initial rollout

Dawn M. Martinez
First Data Corp.

Always be opening

Dale S. Laszig
Castles Technology Co. Ltd.

Company Profile

Transaction Network Services Inc.

New Products

A sweet POS

TouchSuite Pro
Invenstar LLC

Cloud-based terminal and cash register



Clean up your stuff to clean up financially


10 Years ago in
The Green Sheet


Resource Guide


A Bigger Thing

The Green Sheet Online Edition

May 24, 2010  •  Issue 10:05:02

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Stemming the attrition tide

By Biff Matthews

During last month's Electronic Transactions Association's meeting, a friend asked me how to reduce merchant attrition. She mentioned that her company was experiencing 20 percent attrition, which is higher than she and her colleagues want.

I asked her several questions about the nature of the attrition - its size, types of merchants involved and so forth - because attrition, like most everything, is relative. Furthermore, you cannot manage what you do not measure nor know.

Her brow became wrinkled because while she had answers to many questions, she realized her company was not doing enough measurement. Therefore, she did not have the data or knowledge necessary to manage, and thus reduce, attrition.

A good place to start would be to determine the average attrition rate for her company's industry segment. CardWare International customers who have a broad merchant mix across a wide geographic area experience between 7 to 10 percent annual attrition. Still, some are as low as 4 percent; others are as high as 15 percent.

One former client experienced annual attrition of 30 percent, with one year's high at 45 percent. Analysis showed the company's narrow focus on the inherently fragile hospitality industry and the company's emphasis on start-ups were the causes. The analysis also revealed that 30 percent was below average for that industry focus.

Pin down the details

To combat, hence manage, attrition, you must arm yourself with the correct data. Attrition of 30 percent is high for the average portfolio, yet 30 percent can be the norm for a particular silo.

The critical question to managing attrition is whether you are surveying merchants about why they left. The simple answer you find when looking into this is price. The merchants came to you because of price, so they left you because of price. That's possibly true, yet is there more to the story? Dig deeper since learning who is leaving and why yields three results. You identify:

Following are the questions to ask for this analysis:

Disclaimer: we all have trophy accounts; these simply fall outside this type of analysis unless you have lost two or more within a short time. Factor them out unless they are unprofitable.

Also, determine the PITA (pain in the behind) factor for difficult accounts. Assign a PITA factor-to-profit ratio on a scale of plus 1 or 5 percent for an easy customer who gives you referrals. Assign zero for neutral customers or those who are never a hassle. Then assign minus 1 or 5 percent for accounts that were impossible to satisfy.

Use what you learn

Statistics without analysis are useless. For instance, if you have 5 percent attrition, you may perceive that as low. But that percentage by itself is meaningless. If the industry norm is 1 percent, 5 percent is five times greater than the norm - not so good. Everything is relative.What you seek are relationships, that is, cause and effect and how different aspects are trending.

Next, apply the 20/80 rule. Identify the top 20 percent of high-profit merchants among those you lost. Survey these lost accounts, asking why they changed processors. Better yet, ask what would have caused them to stay. Understanding which merchants you want to keep and what actions will keep them in your portfolio is the crucial step in managing attrition.

Remember, you cannot manage what you do not measure and therefore do not know. By learning critical information about why merchants left, you learn to avoid merchant groups or characteristics that do not support your growth and profit. Identify former customers to survey; then ask the hard questions. These merchants have nothing to gain or lose at this point, so accept their responses at face value. And probe beyond the all too easy culprit of price as the cause for leaving. Do the analysis. Protect your investment. Fix issues that caused highly profitable merchants to leave. And now that you have identified and therefore can manage the perfect customer, you should:

It is equally important to appreciate that attrition is inherently good when unprofitable, high PITA merchants leave.

Biff Matthews is President of Thirteen Inc., the parent company of CardWare International, based in Heath, Ohio. He is one of 12 founding members of the Electronic Transactions Association, serving on its board, advisory board and committees. Call him at 740-522-2150, or e-mail him at

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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