MER­CHANT AT­TRI­TION IS A BIG PROB­LEM — CAN BIG DATA HELP?

ISO & Agent - - HARNESSING DATA | TECHNOLOGY -

Us­ing good, old-fash­ioned cus­tomer ser­vice and con­sul­ta­tion to cut down on mer­chant at­tri­tion has been part of the ac­quir­ing play­book for years. But that play­book is long over­due for an up­date.

A newer con­cept is to com­pile im­por­tant data prior to any real prob­lems to get a bet­ter han­dle on what mer­chant clients think of their pay­ments ser­vices. The ma­jor card brands, at one time or an­other, have in­tro­duced pro­grams to help their ac­quir­ing banks and in­de­pen­dent sales or­ga­ni­za­tions cut down on mer­chant at­tri­tion. And pro­ces­sors have teamed up with soft­ware providers to do the same.

At­tri­tion is an on­go­ing prob­lem that costs mer­chant ac­quir­ers $2 bil­lion a year in losses, plus an­other $1 bil­lion per year spent to re­place the mer­chants they have lost, ac­cord­ing to a re­port from Wom­ply In­sights and Gold­man Sachs Eq­uity last year.

Look­ing ahead, there are new data tools and mer­chant man­age­ment dash­boards to help ac­quir­ers at­tempt to lower the na­tional av­er­age of 12% to 15% at­tri­tion rates, or give some hope to those fac­ing 25% to 30% turnover in their port­fo­lios. But new tools can go un­used in an in­dus­try that has tra­di­tion­ally failed to ad­dress client con­cerns quickly and un­der­stand the ram­i­fi­ca­tions of los­ing an ac­count.

Some “old-school play­ers” con­tinue to feel that things are just fine if one or two mer­chants leave their port­fo­lios at any given time, said Paul Mar­taus, a mer­chant ac­quirer con­sul­tant and re­searcher for Mar­taus & As­so­ciates.

“These are hot-but­ton is­sues with me be­cause we have al­ways called this the need for ba­sic busi­ness fun­da­men­tals,” Mar­taus said. “They are mak­ing mil­lions of dol­lars from these mer­chants, so just call them up and talk to them if they had called with a com­plaint. They have their ad­dresses and phone num­bers.”

Ex­ag­ger­at­ing the prob­lem, ac­quir­ers now face change at ev­ery turn, in­clud­ing new tech­nol­ogy, new com­peti­tors and new pric­ing dy­nam­ics. Jug­gling those is­sues makes it more dif­fi­cult to fo­cus on the crit­i­cal task of keep­ing the clients you have.

“These guys are fac­ing dis­rup­tors like Square and oth­ers that they never faced be­fore,” Mar­taus added. “Square never re­ally put an em­pha­sis on prof­itabil­ity in terms of mer­chant ser­vices, but they are of­fer­ing other pro­grams like cash lend­ing that gets un­di­vided at­ten­tion from mer­chants.”

Ac­quir­ers that fo­cus more on at­tract­ing new clients than on keep­ing the ones they have are los­ing out on the po­ten­tial of pre­dic­tive an­a­lyt­ics that can iden­tify pain points in their mer­chant re­la­tion­ships, said Ra­jesh Ka­math, head of fi­nan­cial ser­vices so­lu­tions and in­cu­ba­tion at Incedo Inc., a tech­nol­ogy ser­vices firm spe­cial­iz­ing in data anal­y­sis and man­age­ment for large ac­quir­ing banks.

“Some say price is the only fac­tor in at­tri­tion, but we ask if that is re­ally true by look­ing at what kind of data the banks are col­lect­ing in their card prac­tice and look­ing at those mod­els to find pre­dic­tors of ac­tion,” Ka­math said.

Af­ter that, it is a mat­ter of de­ter­min­ing if the bank could be do­ing more with data anal­y­sis, par­tic­u­larly from so­cial me­dia chan­nels.

“It is good to find out if the mer­chant is say­ing any­thing that would help us re­al­ize this mer­chant is likely to leave,” Ka­math added. “So­cial me­dia track­ing anal­y­sis is hap­pen­ing in other in­dus­tries, but not so much in pay­ments yet.”

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