How to Reduce Merchant Attrition and Grow The Relationship

Merchant attrition - the departure of a merchant payment customer from its provider, whether a bank, ISO or other - is estimated to be 20%. Some of that is normal, but an astounding 16-17% of merchant attrition is estimated to be voluntary abandonment which can be mitigated.

According to BAI, the industry spends $1 billion to replace lost merchants and requires 3 merchants for every one merchant lost to make up the difference. Therefore, defining a strategy to retain merchant services business should be a priority.

Innovation has become the leading factor for merchants choosing payment services, with cost a trailing second. - Javelin Strategy and Research

Diagnosing the causes of merchant attrition is essential to addressing it. Once you know why merchants are leaving for competitors, banks can take further steps to improve operations and the experience they deliver to hold onto those clients.

Merchant Services Attrition Causes

According to Global Payments 2025 Commerce and Payment Trends Report, the most common reasons for merchants leaving their bank for another payment provider include:

• Lack of innovation, offerings
• Pricing
• Lacking or frustrating customer support

In Oliver Wyman's 2024 Voice of the Merchant Study, it share a detailed summary of the concerns merchants have around cost and other issues related to payments.

Merchants Want Innovation From Their Payment Providers

Pricing and reducing fraud always top issues for merchants. However, other priorities relate to innovation. That includes the need for bank service providers to update or augment aging tech stacks and realign its payment solutions strategy to accommodate emerging trends and consumer expectations that include greater speed and convenience.

Incumbent banks have the advantage of holding business banking relationships with MSMEs and can leverage these relationships to offer a tailored range of products and services that both cater directly to the MSMEs’ needs and pain-points around payments acceptance and assist them in running and scaling their businesses. - Oliver Wyman

Aggregating data across disparate payment systems, including those of third-party vendors and partners that supply point solutions on the bank's behalf, is critical to this future-proofing of merchant services delivery. Unifying data improves operational workflows, unlocks data-driven insights and increases transparency for back-office teams, front-facing customer teams, partners and the merchants themselves.

Strategies for Banks to Maintain and Grow Merchant Relationships

1. Aggregate Interactions To See Full Relationship: Look at the entire merchant relationship so you know its status and health overall. Once banks know that, they are in the unique position to provide greater assistance with other business needs. Right now, merchants are trying to expand payment offerings to meet consumer demand for seamless digital transactions. At the same time, they are always concerned with security and of course, cost. How can you support them in minimizing those concerns? Can you help them in other areas of their business vs. just payments by suggestion appropriate cash or treasury management products or business lines of credit?‍
2. Improve transparency: Clearly communicate progress, changes, handoffs so merchants know where they stand in any onboarding or service journey. Having all of your merchants' activity in one place for back office and client-facing employees to access allows them to answer questions quickly and take steps to progress cases or solve problems.‍
3. Remove friction: Using an orchestration layer that connects all of your data stores, from different departments and external partners into a single place is the only way to truly identify points in the customer's journey that typically become stalled or worse, experience high rates of abandonment. Once those touch points are identified, you can take steps to solve for the friction. Often, that friction comes from a disjointed process in which the merchant is engaging with different teams and systems, all of which don't know what's happeniing with the other. An orchestration platform solves that fragmentation so the merchant is no longer bounced around to get answers.‍
4. Capture trends and red flags using AI: More data provides more for AI to work with. In fact, AI excelwatpulling out hidden insights from massive data stores, which banks typically have on hand. However, that data does need to be unified first for true analysis to be done. AI helps banks identify potential. churn risks and customer experience failures before they lead to attrition.‍
5. Build and adjust CX in real time: Empower internal teams and improve customer experiences to design and adjust customer journeys without waiting for IT resources to become freed up. Every business line, including merchant services, benefits by being able to react to the data and drag-and-drop customer journeys into place. In addition, these tools also allow for adjustments on the fly, which ensures banks can be more responsive to dynamic changes in the industry.

“We’re seeing more investments in more-unified, integrated end-to-end journeys.” -R.J. Ancona, vice president and general manager, B2B product, partnership & client management, merchant services, American Express.

By leveraging modern technology to aggregate data, create transparency, leverage AI and build customer journeys without code, organizations can turn merchant retention from a reactive process into a strategic advantage.

Technology plus Customer Service

In a highly competitive environment where banks are fighting for merchant services buisness against fintechs and other providers, they need to offer great customer service at every step. This means empowering anyone who engages with merchants directly easily accessible knowledge to answer questions and guide merchants to better use the product or service they signed up for.

An orchestration platform like OvationCXM, equipped with a knowledge management module that interfaces with a collaboration and and communication hub across teams and ecosystem partners, can resolve issues more quickly with less effort. That's a win-win for the bank and the merchant.