Key Findings from the 2024 Voice of the Merchant Study

The 2024 Voice of the Merchant Study provides valuable insights into how merchants approach payments, balancing costs, revenue opportunities, and customer retention. Conducted by Oliver Wyman in partnership with the Merchant Advisory Group (MAG), the study surveyed over payments professionals across various industries, including retail, travel, and digital goods.The study's findings shed light on the strategies businesses use to manage payment expenses, adopt new technologies, and integrate payments with customer loyalty efforts.

The report highlights the growing importance of payments as a strategic tool for driving revenue, building customer loyalty, and managing costs. By understanding these trends, merchants can better position themselves to thrive in a competitive market.

Managing the Total Cost of Payments

For many businesses, payment processing costs represent a substantial expense, influencing profitability and pricing strategies. The study reveals that 56% of merchants consider payment costs their top challenge, dedicating nearly 70% of their payments teams’ time to addressing these expenses.

For merchants looking to optimize payment expenses, several strategies are common. Many businesses focus on renegotiating contracts with acquiring banks and card networks, adjusting payment routing strategies, and investing in fraud prevention measures to limit chargebacks.

Smaller teams often find negotiating acceptance costs to be one of their biggest hurdles, while larger teams deal with the complexity of managing multiple providers across different sales channels.

Despite the growing complexity of the payment environment, merchants have largely kept their payments team sizes stable. Over 95% of survey respondents reported no change in the number of full-time employees dedicated to payment processing, fraud prevention, and chargeback management.

Larger businesses with transaction volumes exceeding $30 billion tend to have larger payments teams, while smaller organizations manage costs with leaner staffing models.

Merchants are Using Payments to Drive Revenue Growth

One of the most significant findings from the 2024 study is the emphasis merchants are placing on payments as a driver of revenue growth. Payments are no longer just a transactional necessity; they are a strategic lever that can help businesses expand their reach, improve customer experiences, and increase sales.

Developing Comprehensive Payments Strategies

Merchants are dedicating a substantial portion of their time to developing and refining payments strategies. According to the study, about 30% of the time merchants spend on payments topics is spent on strategy. This is particularly true for larger merchants, who often have more complex operations and higher transaction volumes. These businesses allocate roughly 15% of their time to payments strategy development, compared to 10% for smaller merchants.

The complexity of managing multiple payment methods, partnerships, and technologies has made it essential for merchants to have a clear and cohesive payments strategy. As one merchant noted, "We really need someone with the right expertise in-house to support our complex payments strategy and to manage all the partnerships we are juggling."

Growing Acceptance of Alternative Payment Methods (APMs)

Another key trend is the increasing acceptance of alternative payment methods (APMs). Digital wallets, such as Apple Pay and Google Pay, are leading the way, with 90% of merchants expected to accept these payment methods in 2025. This near-ubiquitous acceptance reflects the growing consumer preference for convenient and secure payment options.

Beyond digital wallets, other APMs are also gaining traction. Real-time payments, PayPal, and pay-by-bank solutions are expected to see significant growth in adoption over the next few years.

Acceptance of real-time payments is projected to grow by 16% through 2025.

The rise of APMs is not just about meeting consumer demand; it also presents an opportunity for merchants to differentiate themselves from competitors. By offering a wide range of payment options, merchants can attract a broader customer base and improve conversion rates.

International Expansion

International markets are becoming an increasingly important focus for merchants looking to grow their payments volumes. The study found that 50% of surveyed merchants process transactions outside the U.S., with 60% of these merchants seeing significant international volumes (more than 10% of their total transactions).

To support their international operations, many merchants are adopting local acquiring strategies.

Local acquiring allows merchants to process payments through local banks or payment processors, which can help reduce costs and improve transaction success rates. Larger merchants are more likely to prioritize local acquiring. 60% of merchants leveraging this approach have transaction volumes exceeding $10 billion.

The organizational structure of international payments teams also varies by merchant size. While over 50% of international payments teams are centrally managed, larger merchants are more likely to have decentralized teams that manage payments on a country-by-country basis. This approach allows them to better navigate local regulations and build stronger relationships with regional partners.

Payments as a Loyalty Tool

In addition to driving revenue, payments are increasingly being used as a tool to build customer loyalty. The study highlights how merchants are integrating payments into their loyalty programs and leveraging personalization to create more engaging customer experiences.

Increasing Interconnection Between Payments and Loyalty Programs

Loyalty programs have long been a popular way for merchants to retain customers and encourage repeat purchases. According to the study, 62% of merchants currently offer loyalty programs, with 70% of these programs managed by marketing teams. However, the role of payments in loyalty programs is becoming more prominent.

Today, only 27% of merchants have loyalty programs that are fully integrated with their payments systems. However, this is expected to change in the future, with just 10% of merchants planning to keep payments and loyalty programs separate. The integration of payments and loyalty allows merchants to offer a more cohesive customer experience, where rewards and incentives are seamlessly tied to payment methods.

Expanding Loyalty Programs to Include General-Purpose Payment Methods

Traditionally, loyalty programs have focused on proprietary payment methods, such as co-branded credit cards or gift cards. However, the study reveals a shift toward including general-purpose payment methods, such as debit cards and ACH transfers, in loyalty programs. Currently, 27% of merchants include general-purpose payment methods in their loyalty programs, but this figure is expected to rise to 46% in the future.

This shift reflects a desire to make loyalty programs more accessible to a wider range of customers. By including general-purpose payment methods, merchants can attract customers who may not be interested in proprietary payment options. As one grocery and pharmacy merchant noted, "Gift cards are generally a one-off customer engagement experience, and we are looking to expand beyond that to improve customer retention and engagement."

Personalization in Loyalty Programs

Personalization is another key trend in loyalty programs. The study found that 57% of merchants already use personalized loyalty program models, and this figure is expected to rise to 70% in the future. Personalized loyalty programs allow merchants to tailor rewards and offers to individual customer preferences, creating a more engaging and relevant experience.

For example, some merchants are using transaction data to offer unique deals tied to a customer's primary payment method. Others are dynamically displaying the preferred payment method at the top of the checkout flow, making the payment process faster and more convenient. These personalized touches not only improve customer satisfaction but also help merchants stand out in a crowded market.

Future Outlook

Payments are no longer viewed solely as a cost center but as a tool for growth, customer engagement, and operational efficiency. With trends pointing toward expanded APM acceptance, international processing improvements, and closer ties between payments and loyalty programs, businesses must carefully assess their strategies to stay ahead.

The 2024 Voice of the Merchant Study provides a detailed look at how businesses are approaching payment management, revenue growth, and customer loyalty. While cost control remains a primary concern, merchants are also recognizing the value of payment strategies in expanding sales and strengthening customer relationships.

For a deeper dive into the results of this study, check out the Amplifying the Voice of the Merchant webinar, where Chargeback Gurus discusses the findings with experts from Oliver Wyman and the Merchant Advisory Group (MAG).