Merchant Gripes Concern Fees And Onboarding More Than Technology, J.D. Power Finds

Against the backdrop of an overall decline in small businesses’ satisfaction with payment processors, Square Inc. ranks highest with a score of 857 out of 1,000, according to the J.D. Power 2021 U.S. Merchant Services Satisfaction Study. PayPal Holdings Inc. comes in second with a score of 852, with Bank of America Merchant Services and PNC Merchant Services tied for third with a score of 849. Overall, the industry average satisfaction score for merchant services providers is 836.

Of the seven merchant-services providers that ranked above the industry average, only Elavon saw its overall satisfaction score rise year over. The Atlanta-based processor saw its satisfaction score increase 38 points.

The overall decline in merchant satisfaction was driven largely by small and micro merchants that came under immense financial stress from sales declines sparked by the Covid-19 pandemic. That pressure made them more likely to contact their payment processor for service requests and to resolve problems, says Paul McAdam, senior director of banking and payments intelligence at J.D. Power. These interactions can be moments of truth, McAdam says.

“More than half [51% in the study] of small businesses reported significant revenue declines in 2020, and that led to more servicing requests and requests for accommodations, such as waiving fees,” McAdam says. “The industry responded to some of these needs, but it was the micro merchants that felt the most financial stress and had the lowest satisfaction levels. It was that segment that contributed the most to pushing down satisfaction scores. It’s a trend we have seen in other [payments industry] studies.” 

Many of needs that small businesses have, as well as the servicing patterns observed in 2020, will remain relevant well into 2021, the study says.

The study, which has now been conducted for three consecutive years, is based on responses from September through November 2020 from 3,253 small-business customers of merchant-services providers.

Merchants ranked Square highest in satisfaction for cost of service largely due to its clarity in pricing and fees and for helping small businesses understand their payment-processing fee structure. “When merchants understand the fee structure, there is a higher level of satisfaction because there are no surprises,” says McAdam. 

Square also rated best in the reasonableness of total costs and in the availability of options to manage and/or control costs. Merchants also gave Square high marks for ease of use and reliability of technology and customer service.

While payment processors have done a good job of introducing new technologies that make it easier for small businesses to accept cards and digital wallets, McAdam says they should anticipate that many of the challenges and financial pressures small businesses faced in 2020 will continue into the foreseeable future. As a result, they should tailor customer-facing strategies to address those needs.

“The technology is working, it’s consistent, it’s reliable,” McAdam says. “The variations in rankings comes down to cost of service and ease of onboarding new accounts. That’s what separates the high performers from the low performers.”