J.D. Power’s 2024 U.S. Merchant Service Satisfaction Study takes an in-depth look at how small business owners feel about payment processors. Published on February 1, 2024 report From September to November 2023, we surveyed 5,383 businesses with annual revenues between $50,000 and $20 million that transacted through one of 17 leading providers in North America.
Businesses that accept a wide range of payment methods generally have more satisfying processing relationships than those that only accept credit and debit cards.
Shopify, Paysafe and Bank of America received the highest scores in the study, which measured satisfaction with advice and guidance on running a business, payment processing costs, data security, account management and quality of technology.
Practical Ecommerce discussed the findings with Sean Gelles, senior director of payments intelligence at JD Power. Mike EcklerA financial technology advisor and independent consultant, he has worked in the digital payments industry for 20 years, holding senior roles at PayPal and payments giant Moneris.
Other companies such as processors.
Gelles noted that the data revealed two types of small business owners: traditionalists (53%) who accept credit and debit cards, and innovators (47%) who accept digital wallets, cryptocurrencies and other alternative payment methods in addition to credit and debit cards.
“Traditionalists surveyed tended to be older demographics who prefer cash and cheques, while innovators tended to be younger business owners who are open to a variety of payment methods and are generally happy with their merchant service providers,” he said.
Convenience and cost
Eckler asserted that Shopify is well-suited for small, low-volume business owners, offering everything they need to run a small e-commerce site.
“Shopify is good for most merchants because it’s all-inclusive and the transaction fees are pretty standard for low-volume merchants,” he says. “The fees are More expensive This becomes even more true as merchants grow, especially for businesses with multiple employees who need to log in and interact with different parts of Shopify’s system.”
Eckler further noted that retailers with larger transactions may find Shopify’s pricing higher than similar service providers, adding that only larger businesses will be able to negotiate better rates with Shopify, and retailers should weigh the convenience of an all-inclusive solution against Shopify’s higher monthly and per-transaction fees.
Barriers to entry
Gelles noted that researchers have identified three main reasons why retailers don’t accept credit cards, debit cards or both.
Risk of fraud and theft
According to the survey, 22% of stores don’t accept credit cards and 21% don’t accept debit cards. Fraud and theft“Security is obviously a priority and a big concern,” Gelles said, while acknowledging that PayPal and digital wallets (which are tokenized versions of Visa, Mastercard, Discover, American Express and ACH payment methods) are adding additional security features.
“Payments made through digital wallets are difficult to compromise because the real account information is provisioned and tokenized,” Gelles said. “Even if someone steals the token, it’s useless to them.”
High acceptance costs
When asked if they understood transaction rates, fees and service charges, 78% of survey respondents understood them all, while 22% didn’t or only partially understood them, Gelles said. He added that the percentage of merchants who understood varied by fee: authorization (59%), incidental (37%), evaluation (35%), situational (20%) and application account setup (27%).
“The data we’re seeing reflects a complex regulatory environment that is difficult for retailers to navigate,” he said. “There are also signs of fatalism among retailers, with only 16% saying they were surprised by inappropriate fees or charges, and 84% saying they wouldn’t be surprised by what they consider to be inappropriate.”
Difficulty of use
As Gelles noted, payments that are designed to be easy to manage are often difficult for merchants to manage. For example, 16% of survey respondents cited difficulty of use and complexity of the payment process as the reason they don’t accept credit cards, 14% said it takes too much effort to accept them, and 12% believe processing and handling credit card payments creates additional manual work.
Gelles found it interesting that 17% of merchants don’t accept digital wallets, and 18% don’t. Buy now, pay later From an implementation standpoint, he suggested, digital wallets are very easy to set up and use and not that different from other payment methods.
Digital Wallet
Eckler said: Digital Wallet Providers It promotes the idea that adding payment options at checkout increases conversion and satisfaction. This concept is especially true when selling in countries where digital wallets have an advantage over standard credit card payments. Additionally, it advised retailers to take a holistic approach when evaluating, testing and implementing digital wallets.
“Retailers need to understand that accepting payments via digital wallets comes with a variety of costly implications, including complex technical integrations, differences in settlement timing, longer fund holding periods and higher foreign exchange fees. Additionally, for each digital wallet offered, retailers must maintain different reconciliation, reporting and risk management systems.”
Gelles encouraged merchant service providers to promote the ease of use of digital wallets: “As with most other payment methods, merchants need to get it set up correctly with their providers. If MSPs can promote the ease of use of digital wallets, it’s a big win for everyone involved.”
