Market Trends Shaping Merchant Account Valuations

The value of a merchant account can be affected by many factors. Some of these issues stem from the practices of individual businesses. However, broader market trends also play a significant role. We will now examine some of the key factors that influence merchant account valuations.

The Importance of Merchant Account Valuations

A merchant services portfolio comprises businesses that accept debit cards, credit cards, or other non-cash payments. These businesses may operate online or in brick-and-mortar locations. If you have such a portfolio, it’s essential to know its value. The same is true if you’re in a position to acquire such a portfolio. Several factors contribute to merchant account valuations, including monthly revenue, diversification, and the rate of account attrition.

Market Trends Affecting Merchant Accounts Valuations

Some recent trends that are currently having a substantial impact on merchant accounts. Keep in mind that not all of these trends will affect every account equally, as it depends on the types of businesses that are involved.

Apps For Paying

Digital wallets and payment apps are becoming increasingly popular. Statista predicts that digital payments will be the fastest-growing payment method worldwide. Google Wallet, Apple Pay, and other digital wallets make it more convenient and secure for customers to make payments. Businesses that accept such payment methods will have an edge over those not up to date on this technology.

Cryptocurrency Payments

Bitcoin and other cryptocurrencies have been around for over a decade, but they’ve only recently started to gain mainstream adoption. Increasingly, businesses are accepting payments in cryptocurrency. Some large companies that now accept Bitcoin payments include Starbucks, Home Depot, Whole Foods, Microsoft, and Subway. As crypto gets more widely used, businesses that don’t offer it as a payment option will be left behind.

AI Integration

AI is being increasingly utilized for faster and more secure transactions. Many companies also use AI for logistics, inventory management, and customer service. Businesses that utilize the most advanced AI applications contribute to higher valuations for merchant accounts.

Omnichannel Payments

People are shopping differently today. There’s now less of a clear line between shopping online and offline. Customers prefer to transition seamlessly between channels and shopping methods. Retailers such as Home Depot, Walmart, and Starbucks are making it easy to merge online and offline experiences.

Customers can shop online and pick up products at the store. Alternatively, they can browse in-store and use the store’s app to arrange for home delivery. There are now payment services, such as PayAnywhere, that enable smaller businesses to create omnichannel experiences comparable to those of larger brands.

What to Consider With Market Trends and Merchant Account Valuations

Market trends can significantly affect merchant accounts. Knowledge of trends makes it easier to predict a portfolio’s future value. You need to be familiar with economic conditions and market trends if you’re considering merchant deals such as selling your portfolio. Here are some key factors to consider.

Economic Expansions and Downturns

Economic statistics can be complicated and confusing. Economists and others, such as journalists and politicians, may use different criteria to measure indicators. Sometimes parts of the economy are growing while others are shrinking. However, there’s usually an overall trend of expansion or contraction.

During periods of growth, consumers tend to spend more freely. This doesn’t mean every business does well, but it’s easier to make more sales. With higher projected revenues, merchant accounts are valued more highly. On the other hand, people tend to spend less during more challenging times. Portfolios tend to appreciate when consumers are spending more freely.

Trends Impact Industries Differently

While the economy as a whole certainly impacts merchant account valuations, trends affecting particular industries are also significant. Here are some examples.

• Businesses selling high-end goods and services. People tend to cut back on discretionary spending during lean times. Businesses that deal in areas such as luxury goods and hospitality businesses are likely to be hit the hardest.
• Technology firms will be most affected by innovations in the tech sector.
• Businesses are affected by cultural shifts. Consumers’ preferences in food, fashion, or the arts can change rapidly.
• High competition industries. More competition makes it more challenging for businesses to profit. Competitors can be brick-and-mortar businesses or online.

Are Businesses Adopting New Technology?

A business that leverages new technology has a competitive advantage over one that clings to outdated systems. Adaptation matters most in sectors where emerging technologies, such as AI, are being widely adopted. Keeping up with innovations such as automation tools, omnichannel integrations, and cryptocurrency payments will give businesses a competitive edge in the years to come.

Long-Term vs Short-Term Trends

When analyzing the impact of trends, it’s worth asking if the trend is likely to be long-term or more transient. It’s more relevant to note if a business is paying close attention to trends that are likely to persist. For example, payment apps and AI innovations are likely to continue advancing. On the other hand, consumers often change their preferences for everyday items. Trends in areas such as food, home decor, and fashion often change from season to season.

Diversification

A diversified portfolio comprises businesses across various sectors, which can help offset the risks associated with changing trends and disruptions. A diverse portfolio may also include a mix of brick-and-mortar and e-commerce businesses, as well as those that accept a variety of payment types.

Regulatory Environment

Regulations always affect businesses. Strict regulations make it more challenging for a company to stay profitable. That’s why, when examining market trends, it’s essential to consider any laws or regulations that impact the industry. For example, many types of businesses are affected by changes in zoning laws, minimum wage, environmental regulations, and licensing rules.

Keep Up With Market Trends

When examining merchant accounts, market trends, as well as related factors such as economic conditions and regulations, must all be considered. Businesses are not isolated islands; everything happening in society can make things harder or easier for them. It’s therefore essential to constantly monitor market forces.