When we started supporting merchants with reviewing payments acceptance arrangements we assumed that fee savings were the primary driver for engaging a consulting firm. It turns out we were wrong.
We always consider a range of non-price factors when evaluating different payment service providers including customer service, reliability/resilience, least-cost routing enablement, global reach, omni-channel capability, support for local/alternative payment methods, a seamless customer checkout experience, reporting flexibility, settlement timeframes, authorisation rates, fraud management, ISO/PayFac/marketplace support, and the innovation road-map. But we believed that achieving substantial fee savings was critical, hence our original name, Merchant Pricing Hub.
However, based on two market research studies we commissioned over the last 12 months, we found that cost reduction (pricing) is not the primary criteria when evaluating payments acceptance arrangements:
- The University of Technology Sydney EMBA study conducted in Q4 2021 interviewing 30 CFO/CEO/CIOs from the retail, hospitality, and not-for-profit sectors found that while CFOs are focused on costs, they don’t see merchant fees as a top 5 cost driver.
- The eTail Australia Industry study conducted in Q3 2022 (to be released in November 2022) surveying 100 CMOs, heads of digital and e-commerce, found that cost reduction ranked 9th in the list of evaluation criteria when selecting a new payment service provider.
Never one to shy away from admitting we made a mistake – we have decided to rename our merchant payments focused consulting services, Merchant Advisory. This new name better reflects the payments optimisation work we were doing already, evaluating both price and non-price criteria, as well as the new initiatives we have underway to deliver value to our clients and the industry. We expect that we will continue to achieve 20% to 40% in fee savings for clients, but we also do so much more.
Author: Mangala Martinus, Managing Director, Payments Consulting Network and Merchant Advisory