At the beginning of November, the Payment Systems Regulator – an independent subsidiary of the Financial Conduct Authority – published the final report of its review into the supply of card acquiring services. The PSR launched this review of the market due to concerns that merchant customers are not getting the best value for money, but does this mean that providers are also missing out?
Merchants may not be getting the best bang for their buck by failing to shop around for a better card acquiring provider. Twenty-nine percent of the merchants surveyed said that although they did not change providers during the last two years, they had considered switching in that time. The main drive for considering the jump to a new provider was the desire to find a better deal or to pay a lower price for card acquiring services. However, the report highlighted that providers generally do not make their pricing structures publicly available which can make it very difficult for merchants to compare the prices offered by choosing the provider that suits them the best. The result of this is that many merchants appear to feel apathetic towards searching around for a better deal. One-third of the merchants that considered switching ultimately stayed with their current provider as they felt their current provider was still the best option. However, what is not clear from the survey is whether the decision to stay was because their current provider does actually provide the best pricing, or because the merchant found it too difficult or time-consuming to search around for a better offer.
The report survey also highlighted that some merchants are getting a stiff deal by entering into long contracts with card acquiring providers and by failing to try and renegotiate the terms of their agreements. This may be because small and medium-sized merchants could feel that they do not have enough bargaining power in their relationship with their acquiring provider. However, almost ninety percent of those merchants who did try and renegotiate the terms of their current agreement were successful. Merchants should not be afraid to reach out to their providers as, chances are, they will come out on top!
Although almost a third of merchants have considered switching in the last couple of years, providers remain opaque about their pricing structures. Card acquiring providers appear to think that by not publishing their prices online, they are increasing the likelihood of building a relationship with a prospective customer after they enquire about rates. However, the results of the merchant survey indicate that many merchants are open to changing providers and openness with pricing could give the merchants that are not satisfied with their current provider the push they need to make the switch. By putting their cards on the table, card acquiring providers may actually see an increase in new merchant customers.
Providers should also be open to their merchant customers who want to renegotiate pricing terms and even could even periodically remind customers to reach out and enquire about new deals. The report survey indicates that the service the merchant customer receives is almost as important as the price. Sixty-four percent of the merchants surveyed who had not considered switching providers in the last two years said they had not looked around because they were satisfied with their current provider, yet only eight percent stayed because they are happy with the prices offered to them. This suggests that it is the customer service merchants have received from providers that have kept them as a customer rather than excellent price offerings. Card acquiring providers should be aware that their customers could be eager to jump to a competitor if it becomes apparent that the competitor’s prices are better and the service is just as good. By not penalizing the merchant clients that want to change their contract terms and checking in with their customers about their current pricing plan, providers can develop better relationships with their clients, offer them better deals and ultimately retain their business.
The PSR will publish a remedies consultation in 2022. They have said that this process will aim to develop measures that increase merchant engagement and ultimately improve choice and prices. Although no indication has been given as to what form these measures may take, they could encourage providers to fully disclose their pricing structures or suggest that providers set shorter contract terms which may trigger merchants to shop around before settling in a new agreement.
While we wait for the results of this consultation, why not take a look here at the merchant services offered by Safenetpay.