How to fulfill the Merchant Hierarchy of Needs as a payment service provider

In the dynamic landscape of ecommerce and digital transactions, effective merchant management is increasingly important for merchant service providers and independent resellers. Merchants are the backbone of the payment ecosystem and need careful nurturing and support to drive long-term portfolio growth for payment service providers. By understanding and prioritizing the needs of merchants, payment partners can position themselves for mutual growth – but how can you get started?

Exploring the Merchant Hierarchy of Needs

Payment service providers can turn to the “Merchant Hierarchy of Needs” to understand what their customers need to be successful – from foundational basics to more advanced capabilities. Merchants’ needs will vary by their specific business type, industry, and goals – but overall, this framework is helpful for payment service providers to take a structured approach to understanding their customers and thoughtfully developing their offerings.

1. Level 1: Competitive advantage

The foundation of the Merchant Hierarchy of needs is competitive advantage. This includes merchant requirements for reliability, security, managing risks/regulations, and support.

2. Level 2: Operational alignment

Once merchants have secured their Level 1 needs, they are ready to improve their operational alignment – finding the right payment solutions, onboarding a payment services provider, and integrating with organizational systems.

3. Level 3 Scalability and growth

Next, merchants are ready to scale with innovative payments and global business expansion.

4. Level 4: Development

Finally, after mastering Levels 1, 2, and 3, merchants are ready for development opportunities and enhanced customer retention.

Optimizing merchant management for sustainable business growth

As a payments partner, maximizing merchant success is essential for long-term profitability; this includes satisfying your customers payment acceptance requirements, while helping them scale their operations and prepare for any unexpected challenges on the horizon.

Level 1

Reliability and consistency

Your customers rely on you to consistently provide payment processing, innovative solutions, and proactive merchant services to keep their operations running smoothly every day. As IT outages* and data security challenges continue to plague many global industries, it is more important than ever to ensure your payment services have few disruptions and your company addresses issues quickly. Minimizing downtime and preventing costly delays will build customer trust and loyalty long-term.

Robust security measures

Secure transactions and personal data are critical in the payments world. US consumers* increasingly report concern about how the public and private sectors store and use their personal information – becoming more wary of potential data breaches and privacy hacks through their daily web activity and purchases. Thus, payment service providers who focus on PCI DSS compliance validation, EMV certification, tokenization, point-to-point encryption, and other security measures will have competitive advantage over those who cannot keep up with mitigation of emerging fraud threats. Further, reducing potential fraud will save you and your customers time, money, and resources that you both would otherwise spend on resolving cardholder claims and managing disputed payment settlements.  

Regulation and compliance help

The world of commerce is global. Most merchants need help navigating payment regulations across many countries and compliance standards to be successful. The 2023 Merchant Advisory Group/Oliver Wyman Voice of the Merchant report* shows that 17% of surveyed merchants consider regulations and network requirements to be their largest operational pain point. Payment service providers can differentiate themselves from competitors by proactively guiding customers through Know Your Customer (KYC) standards, data security requirements, card brand rules, and other compliance tasks. Seamless regulatory management can reduce legal and reputational risks, improve operating costs, and speed up application approvals for new customers.

Responsive support channels

Your customers need to be able to do business every day without disruptions or delays. That’s why it is important to provide 24/7 dedicated customer support over the phone, email, website, and even social media – ensuring you solve their questions and issues quickly and painlessly. Further, it is important to regularly analyze customer feedback* and satisfaction ratings to identify trends and continuously improve your offerings – reducing future merchant pain points and building trust in your company.

Level 2

Customized solutions

Business needs vary by size, industry, and end-customer segment – one size does not fit all. Your merchants need customizable payment solutions and value-added services to meet their unique needs. This could include customized pricing plans, industry-specific software/hardware options, APIs, and much more. Actively asking your customers for their feedback on your products and services creates opportunities to tailor your offerings and prove a commitment to their success. This will drive growth for you and your merchant portfolio, while boosting your brand reputation and customer loyalty – in fact, research from Bain & Company* shows that customers are more loyal to financial industry players who offer personalized products and marketing.

Comprehensive onboarding

As “DIY” experiences become more common among fintech players in the payments industry, clients increasingly value providers who offer personalized onboarding processes. In fact, research from Precursive* shows that the onboarding experience for new technical solutions is the highest driver of customer value and retention. From easy-to-understand support materials to responsive customer support staff, you can ensure your merchants start processing quickly with few disruptions – boosting their trust in your brand, speeding up new revenue growth and reducing risk of customer churn over time.

Integration compatibility

Whether managing finances or monitoring inventory levels, technical solutions no longer exist in isolation. Most companies expect their operational platforms to integrate with each other to provide a single view of their business. The 2024 State of SaaS Integrations Report* shows that easy and fast integrations with existing IT systems is a massive deciding factors for many businesses – they cannot afford to waste time, staff, or resources on solutions that do not align with their technology infrastructure or other requirements. Further, well-executed integrations are a strong customer retention tool, as businesses are loyal to providers who understand their technology needs and align with their systems. For merchants, this may include integration with their current ecommerce presence, servicing software, accounts receivable system, or other critical platforms.

Level 3

Innovation and adaptation

Once your merchants have mastered the first two levels of the hierarchy, they are ready to invest more time and resources to stay a step ahead of competitors – especially improving their payments technology to meet customer expectations and differentiate from other companies. For example, the Federal Reserve Diary of Consumer Payment Choice* shows that US consumers comfortably use about nine different payment methods per month to make purchases – including cash, cards, digital apps/wallets, and wearables. Merchants looking to outcompete their peers should be able to accept any type of payment that their customers prefer and ensure an easy checkout process – which means you should continuously offer new services and software solutions to help them stay a step ahead.

Global payment capabilities

The retail commerce landscape is no longer confined to a single geographic area. Your merchants need to be able to scale their payment acceptance solution with their operational growth – including the ability to serve customers in many currencies and time zones. Payment service providers should be able to handle these expansion opportunities, as well as offer value-added services like Dynamic Currency Conversion and Commercial Card Optimization to create new ways to reduce the cost of payment acceptance.  

Level 4

Partnership development and customer retention

At the highest level of the Merchant Hierarchy of Needs, your customers are completely loyal to you and the sustainable partnership you have fostered. By this point, your key responsibility is to offer tailored resources and strategy development opportunities to keep your merchants and help them continue to grow. From educational resources to input on your offerings, there are countless ways to turn customers into valuable partners – setting you both up for long-term success in the ever-evolving world of payments and commerce.

By understanding the Merchant Hierarchy of Needs, payment service providers can structure the right journey for their merchant customers and set them on the path for success with innovative payment acceptance solutions, dedicated support, and growth-oriented collaboration.

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