What is merchant churn costing your payments business?

Every figure updates from your inputs. The model ignores new sales so you can see what churn alone does to the book you have today.

Annual cost of churn

• Merchants lost each year = active merchants × churn rate.
• Revenue that leaves each year = merchants lost × annual net revenue per merchant.
• Cost to replace them = merchants lost × cost to acquire a replacement merchant. Standing still costs this much every year.
• Revenue lost over 3 years: the book shrinks by the churn rate each year with no replacements. Each year's revenue is the average of the book at the start and end of the year, compared with today's revenue, summed over 3 years.

Lifetime value per merchant

Annual margin = net revenue × gross margin. Lifetime value = annual margin ÷ (churn + discount rate). Average merchant life = 1 ÷ churn.

Portfolio value

Value = active merchants × annual margin ÷ (churn + discount rate). This is the present value of a book that loses the churn rate each year, with margin received at the end of each year and no new sales. It is the sum of margin × (1 − churn)^t−1 ÷ (1 + discount rate)^t over every future year.

Residual multiple

How ISO books usually change hands. Value = monthly net residuals × a multiple that steps down as attrition rises. Monthly net residuals = active merchants × net revenue × gross margin ÷ 12.

The bands are our reading of adviser and buyer ranges, not a published grid. Multiples move in steps, so a small change near a band edge can move value a lot. Buyers price in risk and a higher return, so this method gives lower values than portfolio value.

Valuation impact and each point of churn

Valuation impact = value at scenario churn − value at current churn, using the method you choose. Each point of churn = valuation impact ÷ the points you remove (one point when the slider is at zero). Revenue per point = active merchants × net revenue × 1%.

Chart

Revenue in year t = active merchants × net revenue × (1 − churn)^t, at current and scenario churn. The shaded gap is revenue the scenario keeps.

What is a typical merchant attrition rate?

Published benchmarks put annual attrition for small and mid-sized merchants at about 20% to 27% in the US (The Strawhecker Group, 2016 to 2021), and 13% to 22% depending on provider size (Adil Consulting, 2015). In the UK the Payment Systems Regulator estimated switching at about 8% a year (2021), on top of a business closure rate of 9.8% (ONS, 2025).

How does churn affect the value of a merchant portfolio?

ISO books are priced as a multiple of monthly net residuals, and the multiple falls as attrition rises. CT Acquisitions (2026) says annual attrition above 18% triggers a material discount, while under 12% unlocks platform tier multiples. In a discounted model, value is margin ÷ (churn + discount rate), so every point of churn removed raises value.

How can a payment provider reduce merchant churn?

Price drives many switches, but products and service matter too. Merchants are "less inclined to leave a provider that offers relevant products for the merchant's business" (Adil Consulting, 2015), and value-added programmes such as loyalty make the relationship stickier (Digital Transactions, 2011). Zeal puts loyalty, branded apps and customer insight on the card machines you already deploy. Read more on reducing merchant churn with Zeal and value-added services that reduce attrition.