By Dale S. Laszig
Navigating the new normal spawned by the COVID-19 pandemic, payments industry analysts have observed a growing divide between small and midsize businesses (SMBs) and merchant service providers. This article explores these gaps and their root causes and shares advice from payments industry leaders on how to regain merchant satisfaction and trust.
John Cabell, director, wealth and lending intelligence at J. D. Power, stated that on-site commerce is making a comeback, according to data from J. D. Power's March 2023 Merchant Services Satisfaction Survey. Researchers polled enterprises with $50,000 to $20 million in annual revenue between September and November 2022 to evaluate satisfaction levels with providers that authorized and settled payment cards and mobile wallets.
"In this latest phase of the pandemic, consumers are moving more toward in-person purchases, which changes the dynamics for small business merchant payments because of an increase in card-present usage," he said, adding that merchant services providers need to support the entire customer journey across online, in-app, self-service and in-store commerce channels.
J. D. Power researchers underscored the need to clearly communicate available options and tailor services to fit client budgets. "Merchant Service providers should continue communicating [about] data security and proactively support small businesses with cost and service offerings that address inflationary concerns," they wrote. "Small businesses should seek and adapt merchant services solutions that best fit their cost needs based on changing consumer behavior patterns and a dynamic economy."
J. D. Power researchers found small and midsize merchant satisfaction with acquirers had dropped in 2022 from high levels in 2020 due to concerns about service quality and costs, especially among restaurants and food service providers. Researchers attributed dissatisfaction to inflation and supply chain challenges, along with difficulties hiring and retaining employees.
"Food service businesses tend to be newer and smaller revenue businesses that use self-service more and are likely less familiar with the merchant service solution," Cabell said. "Under those circumstances and without a dedicated account manager, building client satisfaction on multiple dimensions can be a challenge."
Food service isn't the only area replete with complainants. Researchers also found satisfaction with cost of service is down 35 points across all sectors in 2023, which they suggested may be partially due to a higher mix of in-person traditional payments and smaller mix of takeout/delivery compared to 2022. "This is consistent with small businesses across industries reporting higher satisfaction with ecommerce (and in-person mobile) compared to traditional payment methods, as a result of faster merchant account funding," they wrote. Cabell concurred, advising providers to focus on delivering seamless digital experiences by offering to train clients on how to use digital apps, websites and analytics. These tools can create a robust, durable onboarding experience, he added, as new restaurants become clients and experience events like fraud and chargebacks.
Highlighting the need to educate SMB clients about fee prices and options, J. D. Power researchers mentioned that small businesses operating in restaurant and food service sectors would like to have better support in understanding payment processing and fee structures.
Cabell asserted lack of clarity about service pricing and fees is a leading cause of merchant services dissatisfaction, stating, "Small businesses appear to be experiencing what feels like more surprise charges and fewer fee waivers." Providers need to frame their merchant services solutions in terms of value offered by highlighting features and benefits of their solutions beyond just payment processing and demonstrating why these options are competitively priced, he added.
While price sensitivity has long been a staple of the merchant services trade, recent reports indicate merchants are more price sensitive than ever, especially regarding credit card interchange and related fees. J. D. Power found most service providers will be less likely to waive fees this year, compared to last year (35 percent compared to 38 percent) as they strive to find the right balance between retaining customers and maintaining healthy margins.
"There is no one answer [to balancing fees and profit margins] here, since the fees and customer perceptions vary from brand to brand," Cabell said. "However, providers who proactively and effectively communicate to clients how to avoid fees and service charges are more likely to see higher client satisfaction in the long run."
An upsurge in self-help solutions has been a blessing and a curse for merchant acquirers, according to recent reports. While these solutions compensate for service provider personnel shortages and high employee turnover, they may present challenges to merchant customers who are unaccustomed to self-help options.
Indeed, self-service dissatisfaction was highest among survey respondents with business volumes of $1 million and below, J. D. Power researchers noted, adding that numerous respondents found the information provided to be lacking in usefulness and clarity.
"As self-service capabilities have improved, call centers are typically experiencing more complex issues and frustrated customers than in the past," Cabell said. "Having the right problem-solving approach to these conversations is key and makes a key difference in client experience."
Of all the self-help categories, email and chat were the most problematic in terms of customer satisfaction, which researchers judged according to four criteria: promptness of being served; knowledge of the company representative; timeliness of resolving your problem, question or request; and courtesy of company representative.
"Email/online chat is rated lowest of the contact methods with a large year-over-year decline, driven by drops of Promptness of being served and Knowledge of the company rep," researchers wrote, alternatively citing video conference and website interaction as high-growth areas that received high rankings for Timeliness of resolving your problem, question or request.
Gregg Aamoth, co-founder and CEO of POPcodes, agreed customer service representatives (CSRs) play a key role in merchant retention. "When something goes wrong anywhere in the payment ecosystem, the inbound call volumes spike, bringing a lot of the same questions and not a lot of answers," he said. "High CSR turnover and constantly changing technology means repetitive CSR training, which puts additional stress on merchants and service providers."
Aamoth proposed that smart terminals can solve these issues by reducing deployment, training and support costs. He revealed that POPcodes is finalizing a case study with a top merchant acquirer and 20,000 merchants that deployed smart POS technology in a variety of ways, including self-serve access to FAQs, step-by-step instructions, and QR codes that directed users to online videos and guides, which, he added, helped participants reduce inbound support calls by over 50 percent.
"CSRs can close inbound calls more quickly by directing end-users to answers and instructions they need on the smart POS terminal," Aamoth said. "This technology can also enable real-time notifications to keep merchants and their associates informed and less frustrated when there is an issue that has to be 'fixed' externally." Aamoth mentioned he spent nearly 20 years in retail before establishing POPcodes to bring advanced messaging, content delivery and workflow management capabilities to the in-store point of purchase. His experiences at Macy's, Borders Books & Music and Domino's Pizza shaped his belief in smart terminals as an ideal payment platform for processors, merchants and consumers, he noted.
"When you consider the branding, messaging, training and support, automation, data collection, and ability to leverage smart devices to engage and sell more solutions and services, literally every merchant—even the ecommerce ones—should have at least one," Aamoth said.
Aamoth further noted that smart POS devices can be used for two-way communication, which can help merchant acquirers collect feedback and satisfaction scores directly from their merchants, while providing a key help desk metric to measure and improve performance. This combination of usage data and direct feedback can help acquirers identify customers at risk of attrition, delivering insights that address concerns and drive customer retention, he added.
Reflecting on his company's recent case study, Aamoth noted that smart POS devices, used correctly, can be a game-changer. Digital unboxing, for example, can guide new merchants through device setup, expediting activations and reducing the time it takes to process their first transaction. Going forward, he said, merchants can access FAQs and step-by-step instructions as needed, and receive targeted notifications on their screens when they need to complete critical tasks.
"Acquirers, ISOs and their partners are investing heavily to introduce more value-added solutions to their merchants, and yet still struggle to sell and support them," Aamoth said. "Smart terminals are bridging a key B2B communication gap that has existed between merchant service providers and merchants for decades, contributing to low adoption rate for value-added services, high-churn, and billions in lost revenue."
Ultimately, he added, these internet-connected devices will bridge even bigger B2C friction-points to create seamless experiences across consumer brands, advertisers, loyalty platforms, and brick-and-mortar merchants and their in-person and connected customers.
Anne Hay is senior vice president and chief marketing officer at PayNearMe, a fintech company that develops technology designed to make it easier for businesses to manage and accept payments. The company's February 2023 study found the economy is impacting decline rates as consumers dig deeper into wallets and savings to pay bills."These issues are worrisome for billers not only because of the return fees involved, but also because each decline or return means the biller must contact the customer to secure an alternative form of payment, which means more time and cost incurred," Hay said.
PayNearMe helps billers reduce payment declines and ACH returns by deploying business rules once a payer reaches a certain number of declines; for instance, the biller may decide that a customer who's had two NSFs in a six-month period can only pay by debit card or cash, Hay stated.
Noting that 48 percent of consumers surveyed like to split bill payments across payment types (cash, Apple Pay, Google Pay, Venmo, PayPal, credit card, etc.), Hay said PayNearMe and other paytech and fintech companies work hand-in-hand with billers and merchant service providers to address common frustrations, which can lead to a poor customer experience.
"Billers should partner with payment technology companies that can give payers access to the entire menu of payment methods to use as they see fit," Hay said. "Payments technology companies have a number of tools in their toolbox to reduce reliance on customer service staff to handle basic payment-related tasks. They can streamline autopay registration and provide new incentives to participate, like being able to customize payment schedules."
As the payments industry continues to navigate inflation, emerging technologies and geopolitical tensions, industry leaders emphasized that paying attention to merchants and their customers will pay dividends.
PayNearMe found 62 percent of survey respondents had called customer service over the past 12 months. Surprisingly, this included 58 percent of 18 to 29-year-old billers, researchers found, who were more likely to call than other groups when they weren't able to log in.
Paytechs can make logins easier, Hay said, by sending personalized payment links or QR codes to customers and by ensuring all important account information is visible on a payment screen. They can also send payment reminders by email, text or push notification so customers don't miss a payment and have to contend with customer service calls and late fees.
"We know our payments technology and attention to billers' needs can alleviate a lot of frustrations and prepare customers for whatever economic uncertainties lie ahead," she said.
Dale S. Laszig, senior staff writer at The Green Sheet and managing director at DSL Direct LLC, is a payments industry journalist and content strategist. Connect via email email@example.com, LinkedIn www.linkedin.com/in/dalelaszigand Twitter@DSLdirect.
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