A new survey from Mercator Advisory Group's Small Business Payments and Banking Survey Series finds that U.S. small businesses have complex needs and take advantage of many of the same payment services required by larger merchants, such as mobile apps for couponing and receipting or mobile wallets for e-commerce. Many third-party providers offer smaller merchants ancillary services they need aside from core processing services. Respondents who claim their small businesses use merchant acquiring banks are more likely than those who use third-party providers to consider the acquiring bank their primary bank. However, that could change if banks don’t keep abreast of small business needs and concerns.

1. Payment Acceptance in a Complex Environment:
Banks, Watch Out!
2017 Small Business Payments and Banking Survey
July 2017

2.  2017 Mercator Advisory Group
Mercator Advisory Group’s most recent Insight Summary Report, Payment Acceptance in
a Complex Environment: Banks, Watch Out, based on the company’s annual Small
Business Payments and Banking Survey for 2017, reveals that 59% of card-accepting
merchants in the United States use acquiring or merchant banks for their payment
processing services. Acquiring banks collectively are a clear leader compared to the next
most common types of provider—a point-of-sale terminal provider (used by 35% of
respondents) and PayPal (used by 30%). But, when the responses are aggregated, more
merchants surveyed use any type of third-party card processor (76%) than use a merchant
bank for payment processing services.
The survey findings show that small businesses have complex needs and take advantage
of many of the same payment services required by larger merchants, such as mobile apps
for couponing and receipting or mobile wallets for e-commerce. Many third-party providers
offer smaller merchants ancillary services they need aside from core processing services.
Respondents who claim their small businesses use merchant acquiring banks are more
likely than those who use third-party providers to consider the acquiring bank their primary
bank. However, that could change if banks don’t keep abreast of small business needs and
concerns.
New report from Mercator Advisory Group’s Small Business
Payments and Banking Survey Series addresses payment
acceptance practices of U.S. merchants

3.  2017 Mercator Advisory Group
Payment Acceptance in a Complex Environment: Banks, Watch Out is the first of three
reports summarizing the results of the 2017 Small Business Payments and Banking Survey,
the second annual survey that Mercator Advisory Group fielded using a web-based survey
of 1,600 U.S. small businesses (between $500,000 and $5 million annual sales) regarding
their use of payments and banking services.
The survey contained questions on today’s business sentiment, payment acceptance
services, business-to-business (B2B) payments, and banking depository and loan services.
Forthcoming companion reports summarize the survey’s findings on business-to-business
payments and business banking services. A copy of the survey questionnaire, developed by
Mercator Advisory Group in consultation with our clients, can be found in the report’s
appendix.
New survey finds that more U.S. small businesses use third-party
card processing providers than use banks

4.  2017 Mercator Advisory Group
“Small businesses are more complicated and diverse than you may imagine as
they try to compete with larger businesses for consumers’ attention,” notes the
author of this report, Karen Augustine, Senior Manager, Primary Data Services
at Mercator Advisory Group. “With the wide range of services offered, merchants
are looking beyond their banks for card processing services, often finding
alternative suppliers of expertise and services that address their increasingly
complex and specialized payments acceptance needs.”
Karen Augustine
Senior Manager, Primary Data Services
Mercator Advisory Group
kaugustine@mercatoradvisorygroup.com

5.  2017 Mercator Advisory Group
Highlights of this Insight Summary Report:
• U.S. small businesses’ most common sales channels by sales volume
• The most common methods of payment accepted by sales volume
• Types of merchant services used by type of provider
• Rate of switching primary card processing providers and reasons for doing so
• Extent of adoption of omnichannel strategies
• Acceptance of mobile payments, virtual terminals, merchants’ own gift cards,
and other emerging payment types
• Prevalence of “steering” of customers to preferred payments
• Extent of use of acquiring/merchant banks
• Most common pain points
• Prevalence of on-site ATMs, either owned or hosted

6. One of the 39 exhibits in the report:
 2017 Mercator Advisory Group
Figure 21: Acquiring Banks Are Lead Card Processors,
Especially with Larger Firms, but More Use Nonbanks
59%
64%
76%
32%
30%
26%
21%
18%
12%
9%
3%
51%
62%
76%
29%
28%
23%
19%
16%
10%
10%
3%
65%
64%
75%
35%
31%
26%
21%
19%
13%
8%
2%
61%
67%
77%
33%
30%
30%
21%
21%
12%
7%
2%
Acquiring bank/merchant bank
Any nonbank third party other than Square or PayPal (net)
Any nonbank third party (net)
Point-of-sale terminal provider
PayPal (for card processing or mobile card reader)
Third-party processor (nonbank processor)
Independent sales organization (ISO)
Gateway processor for online payments
Value-added reseller (VAR) or independent software vendor
(ISV) for specialized POS applications
Square
Don’t know
Total
$500,000–999,999
$1 M – $1.99 M
$2M – $5 M
Companies That Provide Any Services to Accept
Credit and/or Debit Cards, by Company Size
(Base = All, by Sales)
Survey Question Q9. Which of the following companies provide your firm services to accept credit and/or debit cards?
(Select all that apply.)
Source: Mercator Small Business Payments and Banking Survey, 2017 ©2017 Mercator Advisory Group

7. About this Insight Summary Report:
 2017 Mercator Advisory Group
This report contains 67 pages and 39 exhibits.
Companies mentioned are: Visa, Mastercard, Discover, American Express,
PayPal, and Square.
Subscribers to Mercator Advisory Group’s Small Business Banking and
Payments Survey Series have access to these reports as well as survey
cross-tabs, PowerPoint slides of the report exhibits, and the option of requesting
custom queries from the survey data.
For more information and media inquiries, please call Mercator Advisory Group's
main line: 1-781-419-1700, or send email to
media@mercatoradvisorygroup.com.
Please visit us online at www.mercatoradvisorygroup.com.
For free industry news, opinions, research, company information and more, visit
us at www.PaymentsJournal.com.
Follow us on Twitter @ http://twitter.com/MercatorAdvisor.

8. About Mercator Advisory Group
Mercator Advisory Group is the leading independent research and advisory
services firm exclusively focused on the payments and banking industries. We
deliver pragmatic and timely research and advice designed to help our clients
uncover the most lucrative opportunities to maximize revenue growth and
contain costs.
Our clients range from the world's largest payment issuers, acquirers,
processors, merchants and associations to leading technology providers and
investors. Mercator Advisory Group is also the publisher of the online payments
and banking news and information portal PaymentsJournal.com.
 2017 Mercator Advisory Group