Small merchants are generating more payment volume, and health-care providers handily outlive restaurants and bars in their relationships with merchant acquirers, according to a new analysis from The Strawhecker Group.
Data from the Omaha, Neb.-based consulting and research firm’s Acquiring Industry Metrics service shows that the average small and mid-size business will generate $220,000 in annual credit and debit card volume in 2018 versus only $192,000 as recently as 2015. Strawhecker defines an SMB as a merchant with less than $5 million in annual card volume.
The AIM platform contains data on 3.7 million U.S. card-accepting merchants, about half the country’s total, and it comes from 30 acquirers, according to Josh Istas, AIM director. The platform’s data includes price, profitability, attrition, and growth metrics.
Multiple factors account for the average SMB’s 4.5% compounded annual growth rate, says Istas. The healthy economy is pushing overall volumes up, and “there’s a lot of conversion from cash and check,” he notes.
In addition, merchants in emerging card-accepting markets nowadays often are in the health-care and business-to-business sectors, which tend to have higher sales tickets than many traditional retail merchants. “The initial accounts are larger,” Istas says.
Business-to-business merchants on average will generate $537,000 in annual card volume compared with AIM’s overall average of $339,000. B2B merchant volumes were up an average of 8.1% year-over-year in 2018’s first quarter compared with the overall average merchant increase of 7.9% in Strawhecker’s database.
For acquirers, health-care providers tend to stick around longer than other merchants. The average credit card processing relationship for such providers is 48 months, the longest among the merchant sectors examined by Strawhecker. The overall average was 36 months. Near the bottom, at 31 months on average, are eating and drinking establishments.
The complex needs of health-care providers and processors serving them—“the complicated nature of the business as well as the complicated nature of the solution”—make it difficult for medical-related providers to change acquirers once a contract is signed, according to Istas.
Attrition is higher in the restaurants-and-bars sector largely because so many acquirers are chasing their payment business, says Istas. “We see that as a function of competition,” he says. “There’s a lot of churn within the restaurant space.”
In another finding, Strawhecker says an average of 9 basis points (0.09 percentage points) of transactions from e-commerce-only merchants are charged back compared with 3 basis points for non-e-commerce merchants. Chargeback rates vary widely by merchant size, the firm says.