May 15, 2018

Data Proves Reduced Churn When Merchants Are Given Value (Reforming Retail) »

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Merchant acquirers are gobbling up the brick and mortar ecosystem. Their large budgets and massive distribution make them a formidable yet necessary force in the industry. But at the same time their core product – payments processing – is the definition of a commodity. Merchants are learning that payments services are all the same, and there’s no real difference between providers. So when someone shows up on your door with a cheaper option, you jump.

This has made data companies like Womply fun to watch. Womply partners with acquirers and uses the acquirer’s distribution to move a number of merchant SaaS products. Some of these products are built on top of the merchant’s transaction data (which Womply acquires and aggregates from its payments partners), and other products are general good housekeeping tools (like being able to store files and data securely).

Womply has recently shared yet more data showing why payments companies need t0 partner with third parties to stay ahead:

In total, partnering with Womply results in $2.5 million in average annual savings for partners and exceeded $6 million in some cases. The study builds on Womply’s Long Term Impact Study on Merchant Attrition, which found that Womply reduces merchant attrition in partner portfolios by an average of 17%.

That’s great, but payments companies undertaking even more aggressive partnerships are finding even better results. Data we’ve seen has shown that payments companies with POS assets (either through direct ownership or partnerships) are reducing attrition by 60%.

This is good news for payments companies when you’re willing to admit that there’s no moat on payments; partnerships that deliver real value to merchants can make your core business much stickier. The reasons are pretty simple:

  1. Good products keep merchants in business longer
  2. Good products allow you to demonstrate tangible ROI and value
  3. Associating #1 and #2 with your brand change a merchant’s perspective to value, not cost

As interchange fades acquirers won’t be able to continue earning $300/mo per merchant for their commoditized services. They will need defensible products that they don’t have the culture to build themselvesbut can at least distribute with their expansive sales forces. The payments companies that start down this path sooner will be in a much better position later.

And what’s the risk? The ones already moving in this direction are finding benefits of lower churn today. Don’t think this merits much further investigation.

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