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Geographic Impact on Merchant Acquiring Performance During COVID

During COVID, in the U.S. market, geography became an increasingly important consideration for payments companies. This was, and still is, due to the lack of uniformity in regional business management and consumer restrictions by states and municipalities. Now more than ever, management is challenged to develop marketing and sales strategies that take advantage of the post-COVID market by implementing a targeted geographical approach.

Recovery Analysis of credit and debit transactions by state and industry vertical demonstrates a significant difference in sales volume “snapback” rates. Indexing credit and debit volume from February 2020 through April 2021, after normalizing for processed days, shows a wide variance in the “snapback” market indices by state. The example below shows significant relative strength in the North Carolina market recovery compared to the New York Recovery.

Source: The Strawhecker Group’s Acquiring Industry Metrics (AIM) platform of nearly 4 million U.S. card-accepting merchants.

Strategies to enter or invest in sales initiatives in states that are more vibrant from a recovery standpoint should be given consideration.

Additionally, sales and marketing strategies at the state, or even municipal, level should consider acquiring market dynamics of the specific, targeted market. The cost of acceptance for the services provided is not consistent from one geographic market to another. This is due to the unique market development of each geographic footprint over the past 20 years demonstrating a wide variation of competitive intensity at the local level. Within the SMB sector, wide variations exist in local market acquiring revenue rates (and resulting revenue per merchant). The chart below visualizes a material rate differential in Net Revenue between Seattle and Chicago for three (3) industry groups. The difference is significant and the unique performance should be considered as local markets are targeted.

Net Revenue % Difference is the percent differential of Net Revenue rates (per Volume) between Seattle and Chicago.
Source: The Strawhecker Group’s Acquiring Industry Metrics (AIM) platform of nearly 4 million U.S. card-accepting merchants.

There are other local market performance considerations to leverage, in addition to the two discussed above, to support sales and marketing decisions. These include market size, attrition and retention rates, and annual account volume growth.

Considering the geographic variance in merchant, and merchant acquiring, performance as a part of data-driven, informed strategic marketing decisions will improve an acquirer’s financial performance.

By Josh Istas, Senior Director of Analytics