Dive Brief:
- Merchants’ satisfaction with their payment processors has declined, according to the results of an annual survey by the consulting firm J.D. Power. Small business owners have become frustrated with costs and fees as well as technology issues that arise when their customers try to pay with a card or mobile wallet, according to a Thursday press release.
- Restaurant owners and merchants whose businesses generate less than $1 million in annual revenue reported the biggest drops in satisfaction, J.D. Power said in the release.
- Based on the poll of providers, Bank of America ranked highest with respect to satisfaction, as it did last year, although its score fell eight points year-over-year. Block-owned Square came in second, and London-based Paysafe was third. A spokesperson for J.D. Power said there are no commercial sponsors for the ranking.
Dive Insight:
The survey, which gauges small business owners’ satisfaction with the company handling acceptance and processing of card and digital wallet payments, highlights the intense competition in the merchant service provider arena.
Big banks, legacy payments companies and younger fintechs are all angling to process payments for merchants, and to pitch them other services.
On a 1,000 point scale, Bank of America scored 886, Square scored 873 — down five points since last year — and Paysafe scored 867, a 53 point jump for that company over last year.
Rounding out the top ten were PayPal, Chase Merchant Services, Global Payments, Wells Fargo Merchant Services, Stripe, Priority Payment Systems and North American Bancard, J.D. Power said. Chase Merchant Services’ score dropped 18 points, pushing it from second to fifth place.
The industry average for overall customer satisfaction was 853, down six points from last year’s average, J.D. Power said. “The decline is driven largely by lower satisfaction with cost of service, which accounts for 30% of the overall satisfaction score,” the release said. J.D. Power gathered responses from 4,825 merchants between September and November 2022.
J.D. Power noted two-thirds of small businesses said inflation is having a significant impact on their operations, and that could make the costs and fees imposed by their merchant services providers tougher to stomach.
Smaller restaurant and food industry businesses in particular said they receive less support when it comes to understanding payment processing fees, J.D. Power said. Those merchants are also less satisfied with the cost of service for in-person payment methods compared to e-commerce platforms handling takeout or delivery orders.
Technology issues have also been a pain point for small merchants: Just 43% of transactions are completed without assistance when customers use a credit or debit card to pay, business owners said. In e-commerce settings, that figure is 47%. The most common issues include cards being declined, issues with tapping, dipping or swiping, frozen screens and receipt problems.
Meanwhile, mobile wallet use is increasing. As of the third quarter of 2022, about half (49%) of Americans had used a mobile wallet at some point during the previous three months, up from 38% in the first quarter of 2021, a J.D. Power study released last month reported.
“Now is the time when merchant services providers really need to prove their value to small businesses by offering proactive service and support to address inflationary concerns and high-quality technology that works every time,” John Cabell, managing director of payments intelligence at J.D. Power, said in the release this week.
Global consulting firm McKinsey said last fall that about half of small businesses now use an integrated software vendor as their payment processor, while 38% use a legacy merchant services provider. Square and Fiserv’s Clover were the most commonly used integrated software vendors by small businesses across verticals, McKinsey said.
