IF YOU ARE A TRANSACTION PROCESSOR and you plan to visit a merchant you serve, set aside some
time to introduce yourself because chances are they won't know you. First Annapolis recently conducted a survey
of retail merchants with 100 to 350 locations to explore their preferences regarding transaction processors and
their services. Surprisingly, while three out of four merchants knew who their acquirer was, less than half could
name their transaction processor.
In most cases, merchants associated transaction processing services with their acquirer
relationship and only those with special processing needs, or an axe to grind, could name their processor. Of
those who could name their processor, most could not offer comparative information across different processors.
So, unless there's an unfavorable service history, processors seeking brand awareness with merchants are largely
starting from scratch.
This is not to say that there is no brand recognition whatsoever. Nearly all merchants surveyed
that had a private label program (about 35% of the total) could name their processors (in most cases these
merchants engaged a separate pro-cessor for their private label program) and knew at least some of the differences
among them. However, few of those who knew their processor have engaged in a competitive bidding process to select
a new one. The implication is that unless the merchant has an unfavorable experience, it's unlikely that they will
shop around to replace you.
One respondent, when asked about transaction processing services for his organization, lamented
the inflexibility of merchant acquirers in terms of enhanced reporting and managing special report requests. The
main complaint: that transaction processing services were "canned" and that asking an acquirer to accommodate a
unique processing request was liking asking for tickets to opening day…impossible. However, the merchant associated
this limitation with the acquirer not the processor.
But if merchants tend not to think about your service how do you build market share? While few
merchants were evaluating transaction processing per se, several were considering equipment upgrades at the
point-of-sale. Approximately one third of merchants surveyed were either considering updating their point-of-sale
hardware or had recently completed an upgrade. This merchant sentiment indicates that a sales campaign that
associates the transaction processor with superior POS functionality really stands to gain.
Preferences with respect to product attributes also provided useful insight into the merchant
transaction processing mindset. The overwhelming number one driver of merchant transaction processing preference
was price (selected as the most important criteria by 50% of respondents), with reliability and speed finishing
second (20%), and third (15%).
Preferences with respect to reporting and settlement were largely dependant on the type of retail
organization. Generally these services have to be aligned with the merchant. For example, a department store will
require settlement at the corporate level with reporting by location, while a franchised organization will want
location level settlement and reporting.
Transaction processors can use this information to design their sales strategy. Since most
mid-sized merchants don't view transaction processing as a service that is separate from acquiring anyway, sales
efforts might be more appropriately channeled through merchant acquirers or equipment manufacturers. Processors
have to be careful though to make sure that the message regarding the benefits of their services, vis-ŕ-vis their
competitors, is communicated carefully and clearly.