Strategic Advisory in Payments
& Payments Technology

Selling Your Merchant Portfolio Or ISO What’s My Attrition?

One of the most important attributes of your merchant processing portfolio that is considered by buyers when you go to sell your merchant portfolio or merchant processing ISO is attrition. Strangely enough, this attribute is not something that most owners of merchant processing portfolios (so I have found) understand correctly. Attrition by definition is a gradual reduction or loss. As it pertains to your merchant portfolio, attrition is the gradual reduction or loss of what can be merchant accounts, number of transactions, sales volume, and/or revenue (residual) over a specified period of time, and the rate of this loss is crucial to both merchant portfolio valuation (if you are selling) and merchant portfolio maintenance (if you are still building).

How to calculate your attrition, what it tells you about your portfolio, and what significance do the different attrition categories have is something I’ll leave for future articles. However, I do want to clarify the biggest misconception about attrition that I come across from time to time, so owners who are selling their portfolio or ISO understand conceptually what’s being asked of them by a buyer when they inquire about the attrition on their book of business.

Here’s the scenario that comes up most frequently:

Let’s say you own an ISO or merchant portfolio and you’re losing 20 accounts per month, but you’re sales team is writing 20 deals a month to keep up with those losses. BECAUSE YOUR NET LOSS OF ACCOUNTS EACH MONTH IS ZERO, THIS DOES NOT MEAN YOUR ATTRITION IS ZERO. IT’S NOT. This misconception is a fundamental mistake a lot of owners make, and if you misrepresent it to a potential buyer when trying to sell, you could find yourself wasting a colossal amount of time for nothing. Your attrition in this example is 20 accounts because attrition is a measure of the loss over time EXCLUDING NEW BUSINESS. Your attrition rate (the more significant number) is the actual percent loss of accounts of the entire portfolio over this period of time (if you had 100 merchant accounts in your portfolio and lost 20 in one month, your attrition rate for that month would be 20%).

So, before you go to sell your merchant portfolio or ISO, understand what a potential buyer is asking you when they want to know the portfolio’s attrition / attrition rate. Not understanding and misrepresenting it could cost you a deal.