Newer payment options boost merchant satisfaction: study

The new kids on the payment methods block are the popular ones, according to findings in a recent study that polled a wide swath of U.S. merchants.

Buy Now Pay Later, pay-by-bank and gift cards are driving higher levels of satisfaction among small businesses than more-established forms of payment such as debit and credit cards, according to J.D. Power‘s 2024 U.S. Merchant Services Satisfaction Study.

It found 54 per cent of small businesses accept BNPL and that those operations score the relatively new way to pay highest among payment methods, with a 744 score on a 1,000-point scale.

Debit cards (694) and credit cards (692) — tops among entrenched ways to pay, with 94 percent of small businesses accepting them — meanwhile finished lowest on the study’s satisfaction scale.

John Cabell
John Cabell of JD Power

The J.D. Power study, which was redesigned for 2024 and used responses from 5,383 customers of small businesses using merchant services providers, measures small business satisfaction with the companies they use to process electronic transactions with and without cards.

John Cabell, J.D. Power’s managing director of payments intelligence, says these findings are interesting given “the foundational payment methods credit and debit, which are ubiquitous for many small businesses, are not the foundation for satisfaction.”

He said younger and newer business owners are more inclined to accept and utilize several payment types.

Use of multiple payment methods drives deeper merchant engagement

“(There’s) a population invested in those fringe payment types that tends to be more satisfied,” Cabell said.

“Innovators tend to be more satisfied generally, but they’re also the ones who tend to be using these fringe payment methods more. The level of engagement that the merchants have with their payment provider when they use multiple payment types, that tends to drive deeper engagement and a deeper relationship.”

It’s not to say that established banks are losing favour with small business, however. The study  found overall satisfaction levels above average for several established financial institutions, Bank of America (No. 3 on J.D. Power’s overall customer satisfaction index rankings with a 713-point score out of 1,000) and Wells Fargo (No. 5 with 708 points) among them.

“We noted that banks had higher average satisfaction even more so than specialists,” Cabell said, adding that sentiment was “largely driven by costs.”

Shopify ranked first in the overall customer satisfaction index rankings with 728 points, Paysafe second with 725.

The study also found small businesses are bullish for the future, with 88 per cent saying the financial state of their enterprise is the same as or better than it was a year ago and that merchants are interested in utilizing more payment types as a way to encourage customers to shop with them and, therefore, generate more business.

The six areas the study conducted last year from September through November analyzed include advice and guidance on running a business; cost of processing payments; data security and protection; managing accounts; payment processing; and quality of technology.

The U.S. merchant services brands analyzed by the study are the ones with the largest market share.

Other key findings in the 2024 study

  • Overall satisfaction with merchant services goes up when a business offers more payment options. The four per cent of businesses that offer processing of six different payment types each a high score of 793.
  • Cost, fraud risk and complexity are the biggest obstacles for small business owners. Among the businesses that refuse to accept debit or credit cards, higher cost of acceptance and higher risk of fraud or theft are the biggest reasons why.
  • The divide between small businesses that accept innovative payment types and those who prefer offering conventional methods has widened. The more innovative businesses, which represent 47 per cent of those represented in the study, that tend to accept a variety of payment types are younger, newer owners while 53 per cent prefer cash, checks and in-person transactions. Overall, the study finds innovators are significantly more satisfied with their payment service providers.

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  • Craig Ellingson

    Craig is a freelance writer and editor. He has toiled in various positions for various newspapers in Western Canada, including the Edmonton Journal and the Calgary Herald.

    When he’s not busy fixing his home, you can find him experimenting with his slow cooker, finding the right grind (and coffee bean) for his AeroPress, reading fiction and non-fiction, mulling over director Ingmar Bergman’s works, and practicing his backward crossovers (both sides!) while ice skating.