Building consumer trust can make loyalty programs a two-way street

With less shoppers carrying cash, and new payment options on the horizon every day, many retailers are rolling out new ways to meet customers where they pay - whether that be mobile, contactless or otherwise.

For small to medium-sized merchants, keeping up with changing payment trends is a full-time job — even if it’s just a matter of credit card type. A recent study by SurchX shows that 90 percent of consumers expect merchants to take any credit card they choose to use. As credit card processors like Visa and Mastercard increase processing fees, margins are getting even tighter. But SMBs simply can’t afford to lose a sale because they don’t accept a customer’s preferred credit card.

Today, swipe fees average around 3 percent for each transaction, and SMBs are feeling the strain. SurchX data reveals 91 percent of merchants say credit card processing fees have gone up for their business during the past five years — in part because of a rise in rewards cards, which have higher credit card processing fees.

According to bank analyst Charles Peabody, rewards costs grew an average of 15 percent year over year in the third quarter of 2018 at Bank of America, Citigroup, JPMorgan, U.S. Bancorp and Wells Fargo.

Rewards card charges don’t look like they’re dropping any time soon, with 86 percent of consumers saying they do most of their shopping with a rewards credit card, according to SurchX data. Although some retailers have already begun pushing for legal changes to lower fees, retailers continue to sacrifice their profit margins for the sake of customer retention.

Today, there’s a way for retailers to increase their margins by recouping those losses from swipe fees. Despite merchants’ concerns, SurchX's study shows that price doesn’t rule the day for consumers, and they are likely willing to pay those credit card processing fees for the merchant. In fact, 98 percent of shoppers say they have or will pay a surcharge.

Trust and loyalty also play a role, as 75 percent of shoppers will pay at least 5 percent more if they have successfully purchased from a merchant in the past. By passing these fees on to shoppers, small retailers no longer have to cut vital operational costs to accommodate for low margins.

Keeping up with the latest payment methods can seem like a daunting task for SMBs. To stay ahead of the curve, merchants have to leverage consumers’ willingness to help businesses use their dollars in a way that will ultimately benefit both the business and the customer experience.