Wednesday , June 12, 2024

Securing Merchants in an Inflated Economy

Strategies to Boost Sales and Safeguard Your ISO Business

By Matt Nern, Managing Partner, SignaPay

Investors received unsettling news recently as U.S. consumer prices for September surpassed expectations, hinting at persistent inflation and sparking debates on another potential interest rate hike by the Federal Reserve in November.

The evolving pricing landscape in the past couple of years is reshaping how consumers and merchants conduct business, influencing the merchant services industry in various ways:

Escalating Credit Card Processing Fees: The rate increase in April 2022 delivered a harsh blow to many merchants, exacerbating the impact of inflation on businesses across various industries. In August, Visa and Mastercard were reportedly preparing to raise credit card fees again starting this month.

Shifting Spending Patterns: As prices continue to rise, 95 percent of consumers are willing to alter their spending habits, with 41 percent planning to transition to digital payments exclusively. This shift leaves merchants with a larger share of their profits going toward interchange fees.

Rising Operating Costs: Costs for essentials from food to energy, to office supplies, and business services have risen by 3.7 percent over the last 12 months, directly affecting merchants’ profitability if they are hesitant to raise prices.

Elevated Business Loan Costs: In times of rapid inflation, the Federal Reserve can adjust the federal funds rate, impacting the cost of borrowing for commercial banks. This, in turn, affects the cost of borrowing for merchants.

What You Need to Be Doing Now

Dual Pricing: Offset interchange and other fees by providing a choice between cash and card payments. A slight price difference between the two options covers the merchant’s processing costs while allowing consumers to save at checkout.  Over time this will add up to thousands in extra revenue for your clients.

Target Market Shift: Focus on enterprise businesses with more stability and higher revenue potential, as they weather cost increases better. Consider companies with recurring annual or monthly service fees, such as property management, subscription services, or membership fees. Additionally, target recession-resistant sectors like medical services, child care, auto repair, or home repair.

Product Awareness Drive: Maintain a diversified product portfolio to meet all merchant needs, and continually communicate with merchants about your other products and services. Ensure your staff is well-versed in emerging technologies. For every new product introduced, build a target market from your existing client base, establishing yourself as a trusted advisor in the merchant’s eyes.

Network Leverage: Convert loyal customers into growth tools by asking for referrals or forming referral partnerships. Incentivize them to spread the word, as merchants trust fellow merchants. Referrals are typically the easiest sales to secure with minimal time and financial investment.

Optimize Efficiency with an Experienced Processing Partner: Devote 100% of your time to building your clientele by partnering with a processing provider that supports you comprehensively. A reliable partner automates processes for faster sales and onboarding, provides insights on the latest technology tools and trends, and efficiently manages your customer base from both service and technology perspectives, minimizing wait times. When evaluating potential partners, inquire about their channel support, review their past performance, and ensure your business philosophies align.

Adaptability to market changes is the key to ensuring a steady revenue stream and continued growth for your ISO office. It’s time to assess your office’s health and ensure you have the right partner to navigate the rapidly evolving technical and market landscape.

Numerator

** Visa’s 2022 Back to Business Global Study

***Us bureau of labor statistics

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