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4 Key Steps for Retaining Merchants in an Embedded Payment Model

The digitization of commerce has made it simpler than ever for consumers to choose from multiple vendors for goods and services – whether online with next-day delivery or in-store pickup.

Digitization has also ushered in a new era of choice when it comes to embedded payment processing partners, whether a traditional merchant acquirer or a payment facilitator. And with embedded payments on the rise, projected to reach $59 billion by 2027, many ISVs and SaaS platforms are coming to rely on payment processing revenue for growth and valuation. Choosing the right embedded payment solution is paramount.

Ease of use, performance and pricing are important. But transparency, customer value and service could be the difference between customer growth or customer attrition.

Attrition and churn are a multi-billion dollar problem across industries, but SaaS is particularly affected as new software entrants skyrocket and there is a shrinking pool of untapped customers.

How you enable embedded payments is as important as your software’s performance. Choosing the right partner is key.

There are four steps that ISVs, along with their payment partners, must consistently take to not only retain merchants but grow revenue.

What is Attrition and Churn?

Attracting new software customers takes time and effort. Marketing awareness campaigns, sales team prospecting and contract / pricing negotiations are just a few aspects of generating new business.

These efforts are bundled into customer acquisition costs (CAC), which Deloitte predicts will rise with the growth of Ecommerce and disruptions like climate change, inflation and economic uncertainty.

A customer leaving a business for a competitive product – called churn or merchant attrition – not only costs companies the upfront marketing and sales effort to gain that customer in the first place, but it hits bottom-line revenue targets. According to the CallMiner Churn Index, U.S. companies lose an estimated $168 billion annually from churn.

Compounding that loss, there’s the cost of attracting new customers to replace those who left on top of growing the business. Depending on your industry, studies suggest that acquiring a first-time customer can cost between 5 and 25 times as much as retaining an existing one.

Step 1 - Be Transparent

Transparency in payment processing is integral to the overall ISV / payment processor relationship, but it’s crucial in retaining merchants.

ISVs, along with their payments partner, must walk merchants through each step of the process of working together. This starts with the merchant application, extending to approval, activation and onboarding. Simplicity is a big reason why payment facilitation, with a roughly 24-hour merchant approval and go-live turnaround, is gaining popularity.

Ensuring that merchants understand their processing costs is imperative. One of the biggest merchant complaints – and a major source of attrition – is lack of transparency around pricing and fees. This can be a trickly balance for ISVs and processors, since transactional fee increases are often imposed by the card brands and parties have no choice but to pass the additional cost onto the merchant.

However, concise and frequent communication with merchants about pricing changes can go a long way toward a merchant feeling informed and even empowered about what they are paying for and why.

Step 2 - Communicate Value

Merchant account pricing can be tied to value – which encompasses everything from the payment types offered, to fraud prevention and security solutions, to customer service.

When assessing which embedded payment solution will bring the most value for your customers and strengthen your brand, consider the following:

  • How do your customers like to pay and does the provider offer these solutions? Examples include point-of-sale devices, Ecommerce and mobile payments.

  • Will your customer want all payment types? These can range from standard credit and debit card processing to Automated Clearing House (ACH) for direct bank account debit, to mobile wallets like Google Pay and Apple Pay.

  • Do your customers require additional products to facilitate transactions that your payments provider should offer? Examples include the ability to split payments, add a tip or tie data from their payments dashboard to other software systems.

  • How will your processor secure and authenticate payment transactions? Authentication includes solutions such as 3D Secure (3DS) for Ecommerce payments and encryption and tokenization to secure payment data in transit and in storage.

  • What level of customer support will your payments partner provide? This includes the basics of a general email or phone number, to more white-glove solutions including a dedicated chatbot or phone line with a live representative and an assigned relationship manager for your partnership. 

It will be important for ISVs and SaaS providers to understand the value your provider brings in these key areas and consistently relay this to your customers.

Step 3 - Provide Superior Customer Service

There are two levels of service an ISV must consider in an embedded payments partner.

The first level is service to the partner themselves. There are many providers offering embedded payments, but not all are created equal when it comes to support. Having a dedicated relationship manager devoted to your company ensures that you can grow the partnership together, but they can also act as an escalation point for customer payment issues or questions.

The second level is direct support for your customers. In addition to availability, this means having customer service representatives with payments knowledge but who also understand the partnership. Sales training and staffing are key, but the best customer service teams are not reactive. Representatives make calls to merchants to check in and offer support – even when it’s not an emergency.

Having both of these service levels in place goes a long way in reducing merchant attrition.

Step 4 - Be Proactive

Too many times, customers attrit and companies have no idea why. Retention plans are then launched to get a business back after they have left, which wastes the time and energy of a service team.

If ISVs and SaaS providers have a payments partner that is transparent, provides value and offers superior customer service – all on a frequent communication schedule – then the chances of attrition are lowered. But that doesn’t mean payment providers should rely on that alone.

The best partners conduct proactive reviews and data analysis using standard models or now, artificial intelligence and machine learning. They understand the underlying factors that influence churn. They do deep dives to understand the root of the problem. And they take these learnings to launch proactive strategies to reduce attrition.

An embedded payments partner that is skilled at using all of their data to reduce customer churn will help drive ISV payment revenue growth and profitability.

Choose a Partner with Retention in Mind

The trend toward digital, one-touch commerce and an invisible, convenient payment experience is underway across industries. Payfactory’s no to low-code payment facilitation platform gets ISVs and SaaS platforms up and running with embedded payments in days, not weeks.

But our white-glove approach to partners and their customers is at the heart of our company. Founded by payment industry veterans, we believe that embedded payment processing should be simple, frictionless and fast – while also maintaining the highest level of security, customer service and human support. Contact us to learn more