Over the past three weeks The Strawhecker Group (TSG) has spoken to the management teams at a number of merchant acquirers. The issues that they are facing due to COVID-19 are not universal and are as different as the markets they focus on, as well as the sales and business models they employ.

Below are key points that have emerged in TSG’s ongoing discussions with U.S. based merchant acquirers.

Payments Volume

From a payments volume perspective, some acquirers with heavy “Main Street” portfolios (heavy percentage of SMB restaurant and retail merchants) are the most seriously affected by COVID-19, experiencing as much as a 50% reduction in overall volume – a direct impact to their revenue.

The extremes include those merchant portfolios that are focused specifically on the hardest hit verticals such as restaurant, hospitality, entertainment, and personal services where acquirers have experienced as much as a 75% to 80% reduction in volume. Conversely, portfolios heavy in recurring billing, supermarket, pharmacy and B2B have experienced much lower impacts and in some cases actually have increased their volume and revenue.

Some acquirers are already seeing a slight overall “bounce-back” of 5% to 10% last week over the week of 3/30. The industry is quickly attempting to assess the long term damage and model how the rest of the year will look as the country begins to go to work again. The question is – will the rebound look like a V, a U, or horrors – an L?


Chargeback rates are expected to continue to increase over the next 60 to 90 days. TSG recently surveyed SMBs about chargebacks and found out that 47% of travel and hospitality businesses were experiencing more chargebacks trailed closely by eating and drinking businesses at 40%.

These increases will vary from industry to industry and have an impact into the summer. In some cases, the extent of chargebacks along with the decrease in overall volume, could stress some acquirers severely in the coming months.

Next Day Funding

While all the rage only a few short months ago, some acquirers are looking to change the parameters around next day funding as this merchant feature could lead to excessive risk exposure to the acquirer.

Pricing, Discounts and Fee Suspension

Many acquirers are suspending certain fees to their merchants and offering additional services such as loyalty and payroll services free for a limited period. While Visa and Mastercard announced a delay in its announced interchange fee changes to Q3, some acquirers are already questioning whether that date will be moved to October 1. On Thursday (4/9/2020), The Wall Street Journal opined: “Another Challenge for Small Businesses: Higher Card Fees Could Be on the Way”. This uncertainty has acquirers guessing if and when they should adjust their pricing on merchants in their portfolio this year.

Closed Versus Seasonal

“Closed” versus “Seasonal” may offer some acquirers a way to salvage potential attrition. Some acquirers are suggesting that merchants should contact them directly if they are looking to close accounts. The acquirer may suspend fees and allow them to be a “seasonal” merchant that will reopen as the economy improves. This allows an acquirer to keep merchants on the books as opposed to losing them entirely.

ACH Rejects

All acquirers are anxiously reviewing their reporting this week, looking at their ACH rejects to determine how many merchants closed their doors, as well as their bank accounts. Acquirers are proactively calling merchants in this situation to work out a joint course of action. Some acquirers believe that the cost of ACH rejects could exceed the cost of chargebacks in the coming months.

Reductions in Force

Many acquirers are facing the trauma of considering a reduction in salaries, benefits and staff. Many have already cut their workforce and/or furloughed staff for the immediate future, while others have committed to their workforces that there will be not be cut-backs this year.


Acquisitions came to a screeching halt mid-March. Most prognosticators predict that it will be a slow summer for M&A activity, however many expect that transactions will begin to resurface in Q3. The question will be – will the sellers’ market continue, or will it switch to a buyers’ market?


The commentary above comes from discussions with a variety of merchant acquirers. Not all are experiencing the same issues nor of the same severity. It is clear that there will be a shakeout among ISOs. Many acquirers are facing a trifecta of headwinds: lower volume, new sales have stopped, and attrition is up.

Again, the severity of the current COVID crisis and its resulting financial catastrophe has not affected the industry evenly. Those focused on restaurant and retail are heavily impacted and may be struggling, others focused on certain growth verticals like insurance, recurring payments may have seen an increase in volume. Sales strategy is a big factor as well. Those with a massive W-2 sales force undoubtedly are looking to make cutbacks, while telesales may continue to be more effective. Depending on the vertical, heavily integrated acquirers will likely fare better. Finally, there are obviously regional differences with geographic areas less impacted doing better and bouncing back the fastest.

We’re Here. And We Are Ready To Help.

TSG is assisting its clients through several innovative data techniques to quickly pinpoint issues within their portfolios by benchmarking their portfolio versus peers. In addition, TSG’s risk-focused experts have been performing risk assessments of acquirers to uncover pain points. Please send us a note at info@thestrawgroup.com with comments or questions.

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