A business is looking for payment providers. They check the fees listed on the pricing page and compare two or three alternatives. They find the option they find competitive, and sign up. They use the product, and it works well. Things are fine for six months, or maybe a year.

Then something changes. Maybe a new FP&A hire runs a reconciliation. Maybe the Finance Head looks at a quarter’s transactions and compares the FX rates they received with the mid-market rates for those days. They add up the spread and factor in the settlement time. They work out what the company actually paid per transaction, all in.

This number is not what they thought they were paying. The stated fee was 0.5%. The real cost, after including the FX markup and the float, is closer to 1.5%. At a million dollars in monthly volume, that is a difference of $120,000 per year.

This customer is now lost. This does not mean they stop using the product immediately. That may take a month or a quarter, but the customer has been lost. The company will mark it as churn, diagnose it as a retention problem, and respond with the usual playbook: assign an account manager, offer a discount, and schedule a monthly call for review. But none of it will work.

It will not work because the customer is not leaving over price. They are leaving because they feel they were misled. These are two completely different issues, and they require completely different responses.

A price problem is rational. The customer has done the comparison, found someone cheaper, and is making an economic decision. You can fight this with a better offer. You can add value somewhere else. The customer is still at the table, having a commercial discussion with you.

A trust problem is different. The customer believed something to be true, but discovered it was not. They are now re-evaluating everything you have ever told them. The account manager is no longer a partner; they are a representative of the company that misled them. The monthly meeting is no longer a growth or collaborative conversation; it is a confrontation.

The payments industry has a structural reason for this pattern. Payment pricing comprises five components stacked together: the stated fee, the FX markup, the float, the corridor cost, and interchange (as we discussed in Memo #1). The customer sees the first one, while the rest are hidden. The longer a customer pays the hidden price without knowing it, the larger the gap becomes between what they believed and what was true.

Wise has proven that transparency in consumer payments can give you a competitive edge. They made their FX markup visible. They showed customers the mid-market rate and their markup as a separate line item. This single design decision turned an opaque industry into one where consumers could clearly see what they were actually paying.

Once customers experience that level of transparency, they do not go back. The expectation moves in only one direction – towards higher transparency. And the business customers making cross-border payments are the same people who use Wise and Revolut in their personal lives. They already know what transparency looks like. They will eventually demand it from their B2B providers too.

The B2B market has not had its Wise moment. Business customers are still discovering their real costs through reconciliation, not through the product. The company that changes this will build a moat that is very difficult to breach. A customer who already knows exactly what they pay has no gap left to discover. There is no surprise discovery to be made.

If you are running a B2B payments company and your churn analysis says that customers are leaving for better pricing, go back and look at the data more carefully. Ask when the customer started the switching process. Ask what happened in the weeks before. Most likely, you will find a moment of discovery that led someone to ask a pricing question no one had asked before.

The companies still hiding the FX spread will keep losing customers and keep calling it a retention problem. It is the inevitable consequence of a pricing structure that depends on customers not doing the maths. The churn is not a customer success problem; it is a transparency debt. And like all debts, it has to be eventually paid.

The common assumption made is that customers stay because they like the product and leave because they find a cheaper alternative. This logic leads payment companies to respond to customers about to churn with discounts, and to loyal customers with neglect. These responses are wrong because the underlying mental model of why customers stay or leave is flawed.

Payment retention does not work like SaaS retention. In SaaS, the product is the experience. If the experience is good, the customer renews. In payments, the product is invisible when it works. The better the product, the more invisible it is. The customer does not think about the payments provider until an issue arises. This means the forces that hold a customer in place are largely structural, rather than experiential. And the forces that push a customer out are largely triggered by specific events and not by gradual dissatisfaction with the product.

Understanding how the retention forces and churn triggers work is necessary to build a payments company that retains customers by design and does not rely on accidental (and temporary) retention.

Why customers stay

Five forces make a payments customer keep using the product. They are not equally effective or equally easy to build. Most payments companies end up relying too much on the weakest ones, which are also the easiest to build. Listing these below in the order of effectiveness -

Force 1: Integrations

This is the strongest retention force in payments, and it has nothing to do with how good the product is.

When a business integrates a payments provider through an API, it embeds that provider into its core financial infrastructure. The accounting system mappings, reporting dashboards, and reconciliation logic are all built around the data formats of the payments provider. Over time, this becomes too costly to switch, as it would mean rebuilding it all.

The switching cost is not the technical effort of plugging in a new API. That can be done in a matter of days. The switching cost is the operational overhauling needed - remapping accounting codes, rewriting reconciliation scripts, retraining the finance team, and managing the transition period with two parallel systems. This is why mid-market and enterprise payments companies with deep API integrations often have retention rates well above 95%, even when their pricing is not the most competitive.

Force 2: Settlement dependency

Businesses build their cash flow management around their payments provider’s settlement cycle. For example, a company knows that its USD collections settle in T+1 and its INR payouts settle in T+2, so it plans its working capital, supplier payments, and treasury operations around those timelines.

Switching to a new provider with different settlement timelines means adjusting the entire cash flow model. Even when you have a provider who can settle a day faster, you need to adjust all downstream processes affected by the change. And if the new provider settles a day slower, it can throw the cash cycle off and create a big cash crunch.

Force 3: Corridor coverage

Most payments companies do not cover every corridor a business needs. But once a customer has found a provider that meets their needs for a specific combination of corridors, finding a replacement means being sure the new provider can do the same.

This is not a trivial exercise. The more corridors a customer uses, the harder it is to find a single replacement. A logistics company sending payments to drivers in 12 countries needs a provider that supports all 12 destination currencies with reliable last-mile delivery in each. The new provider might cover 10 of the 12 and claim the remaining two are “coming soon.” The customer’s choice is to run two providers in parallel or wait. Most of them choose to wait.

Force 4: Compliance and onboarding

Every payments provider requires KYC and KYB documentation. For a business customer, this means collecting and submitting corporate documents, UBO records, proof of business activity, and sometimes even audited financial statements. This is a strong deterrent, especially for customers in complex industries or high-risk categories.

Once a customer is approved and is transacting, they don’t want to keep doing this verification with new providers. The deterrents are the time this verification process consumes and the risk that the new provider’s compliance team might reject them or impose restrictions that the current provider does not.

Force 5: Relationship and account management

This is the retention force that payments companies invest the most in, and the one that matters the least.

Account managers build relationships with customers, negotiate custom pricing, handle escalations and conduct periodic business reviews. While these may sound like retention activities, if a customer has decided to leave for structural reasons (such as FX markup or settlement delay in a corridor), these activities cannot stop them. A good account manager will delay the churn, but will not be able to prevent it.

Another limitation is that these activities are personal and not structural. When the account manager leaves the company, the retention efficacy leaves with them.

Why customers leave

The five forces above are what keep a customer in place. But they are not permanent. There are specific trigger events that can shake this stability and push these customers from stable to lost. This almost always happens suddenly. A customer who looked stable last quarter is switching providers this quarter, and the payments company never saw it coming.

Trigger 1: Pricing discovery or broken trust

This is the most common trigger for churn in payments. As covered in Memo #1, payment pricing comprises five components stacked together: the stated fee, the FX markup, the float, the corridor cost, and interchange. Most customers only see one of them. When the customer calculates the total cost of their payments, the stated fees plus the FX markup plus the cost of float, they feel misled.

This is why churn conversations that start with “we found a better rate” are misleading. The rate is not the cause of churn. The cause is that they discovered that the rate they were promised was not the true rate. This is a trust problem, and not a price problem.

Trigger 2: The failed transaction

In payments, reliability is a core product feature. When a payment fails, the damage it does is beyond that failed transaction. It can cascade into a supplier not being paid on time, a payroll cycle being delayed, a contract penalty being charged for missed payment, or a business relationship becoming strained.

A one-off failed transaction in a low-stakes context is forgiven. But a failed transaction that causes a real-world consequence for the customer’s business, or multiple failures over time, will trigger the switching process. These failures force customers to evaluate the risk of failure, which they had not factored into their decision on the payments provider.

This trigger is dangerous because it hits suddenly, and by then, the customer has already made up half their mind to leave. They may have even started with another provider before the payments company finds out.

Trigger 3: The compliance friction

Compliance holds are business as usual in payments. But how a company handles them determines whether the customer stays or leaves. A company that communicates proactively, resolves issues quickly, and explains clearly can maintain the relationship and keep the customer. A company that goes silent, sends templatised emails, and takes two weeks to release funds will lose that customer.

The compliance friction itself is not the trigger here. It’s how the company handles the compliance friction. Customers accept that compliance exists. But they do not want to be treated as criminals or suspects by their own payments provider.

Trigger 4: The coverage gap

If a customer’s business grows into a new corridor that the provider does not support, they need a second provider. Once they have a second provider, it’s natural that they will compare and evaluate both providers. Now, the retention forces at play, which were working in favour of the first provider, start to weaken.

The first provider also doesn’t realise this is happening until the volume starts shifting. The customer did not leave because they were unhappy with something. They left when their business outgrew their provider’s coverage, and the second provider turned out to be better than the first.

What this means

The retention forces and the churn triggers are fundamentally different. The retention forces are structural and slow. The churn triggers are events and operate fast. This is why payments companies are consistently surprised by churn. A customer appears stable for years because retention forces hold them, only for a single trigger event to overwhelm them. The customer is then gone in weeks.

This has three consequences for how payments companies should think about retention.

First, the strongest retention is built into the product, not around it. Integration depth, settlement dependency, and corridor coverage are product decisions. They are not hooks that the Customer Success team can create. The companies with the highest retention are the ones that have designed stickiness into their product.

Second, monitoring the trigger events matters more than measuring NPS or CSAT. A customer who reports high satisfaction can still leave next month if they discover their true cost or suffer a failed payment at the wrong time. The payments companies that successfully reduce churn are the ones that carefully monitor the triggers: compliance hold frequency, unusual reconciliation activity, and corridor coverage gaps relative to the customer’s growth.

Third, the weakest link in most retention strategies is the overreliance on account management to do what the product should be doing. If a customer needs an account manager to get a rate adjustment, to understand their fee, or to resolve a compliance review, the product has failed to absorb the complexity. The account manager is at best a temporary patch, and patches don’t work forever.

Every payments company has customers who look stable right now. But they are one event away from churn. The companies measuring the wrong things, like NPS and CSAT instead of trigger events, or investing in account managers instead of product stickiness, will continue to be surprised by the customers who were stable last quarter, and ‘suddenly’ left.

The Consumer Payments world figured this out a decade ago. Wise does not demo how to make a transfer. Revolut does not walk you through a screen share to open an account. Pix does not require a sales call. You open the app, you do your thing, and you are done. The standard for consumer cross-border payments is zero-touch onboarding and self-serve everything.

It seems that the B2B payment players have missed this trick. They have normalised a workflow in which a business customer fills out a form, waits for a call, sits through a product walkthrough, asks obvious questions that the interface itself should have answered, and then, maybe, starts using the product. Entire sales organisations have been built to compensate for products that cannot explain themselves.

We have convinced ourselves that this is the way to do things. Why? Because “B2B is complex,” and “our customers need hand-holding,” and “the compliance requirements make self-serve impossible.” These are less explanations and more excuses dressed up as industry wisdom.

I do appreciate that B2B payments involve more complexity than consumer payments. Multi-currency accounts, batch payments, approval workflows, and compliance documentation – all are complex. But complexity should not be a justification for bad design. It should be the reason to invest more in good design. The harder the underlying process, the more the interface needs to absorb that complexity. That is what product design is for.

When a payments company requires a demo, what they are really saying is that they have built based on what they understand, and not based on what the customer needs. They have designed their flows based on their internal architecture rather than the user’s behaviour. And now they have hired people to translate it for customers. The demo is this translation.

The cost of this is much more than bad UX. Every demo delays the sales cycle from minutes to days. Every sales call adds to the CAC. Down the line, these customers also need more support tickets, account management, and handholding throughout their lifetime, because the product never taught them to be independent. The dependency, which starts with the demo, stays long enough to impact the LTV.

The companies that will win in B2B payments are the ones building products with zero-touch; that a finance executive can sign up for, configure, and send a first payment through - without needing to speak to a human.

Needing human support to complete a basic workflow means the product has failed at its primary job. The need for demos is not a ‘feature’ or ‘USP,’ but rather an outstanding product and design debt.

This is the paradox of pricing payments. These numbers are all different. Understanding the gap between them is the most important thing to learn about how the payments industry works.

What People Believe

The common mental model for pricing tells us that the payment company charges a fee to send money, and that fee covers their costs plus a margin. If companies offer low prices, they must be more efficient. The expensive companies must be taking advantage of you. Simple.

This is wrong in almost every respect. Looking at payment pricing as a fee is incorrect. It is a combination of interlocking components, each controlled by a different actor, each with its own logic, and most of them invisible to the customer.

The five components of Payment Pricing

Component 1: The Stated Fee

This is the number mentioned on the website. “Send money for $15,” or “1% flat fee.” This is the price the customer ‘thinks’ they are paying.

The stated fee exists for one reason: to give the customer something to compare. When a customer compares three providers, they compare the stated fees. It’s easy to compare 1%, 1.5%, and 3%. While customers think they are rationally comparing costs, they are comparing the wrong numbers.

The stated fee is at best a marketing instrument, with very little to do with the payment company’s revenue model.

Component 2: The FX markup

Let’s say you send $1,000 from the US to India. This payment has to be converted from USD to INR. There is a ‘mid-market rate’- the rate at which currencies trade on wholesale markets. And then there is the rate the payment company gives you.

The gap between these two rates is the FX markup. This markup is never disclosed as a separate line item. This is where the payment company makes real money.

In a real-world example, on a given day, the mid-market rate for USD-INR might be 93. A bank might offer you 91.15, which is a 2% markup. On a $1,000 transfer, you lose $20 - without charging any fee. A company like Wise might offer you 92.75, or a 0.25% markup. That is $2.50.

The difference between these two is $17.5, while the stated fee difference may be as little as $3 on this transaction.

This is why comparing the stated fees is wrong. The FX markup can be 2 to 10 times bigger than the stated fee, depending on the provider and the corridor. For a payments company, FX markup is a primary source of revenue. And yet, this is the component that most customers never check.

Component 3: The float

When you initiate a cross-border payment, the funds are debited from your account almost immediately. But they do not arrive in the recipient’s account for 1 to 3 days, and sometimes even longer. During this time, the payments company (or one of the intermediaries in the chain) holds your money.

The sitting money earns interest. And across a portfolio of millions of transactions, the interest is significant.

This is the float. It is not disclosed to customers. But it contributes meaningfully to the company’s revenue, especially in a high-interest-rate environment.

The float also creates a perverse incentive for payment companies. Faster payments mean less float revenue. When a company says it is investing in speed, it also means it will cut a line item from its revenue to improve the customer experience. While some do this, many don’t, succumbing to revenue pressure.

Component 4: The corridor cost

Money movement across different corridors costs the payment company differently. $1,000 from the US to the UK costs far less than sending $1,000 from the US to Vietnam. Costs depend on infrastructure, banking partner fees, compliance requirements, and FX liquidity, and these differ dramatically by corridor.

In a high-volume and well-regulated corridor like USD-GBP, the cost to the payments company could range from $2 to $4 per transaction. Pre-funded local accounts in the UK, deep GBP liquidity, standardised compliance, multiple banking partners competing for volume. This is a cheap corridor to operate.

In a low-volume, complex corridor like USD-VND, the cost might be $8 to $12. Limited banking partners to handle Vietnam-bound flows, limited FX liquidity that widens the spread and complex compliance requirements for the receiving country. This is an expensive corridor.

And yet, customers in both corridors might see a similar stated fee. The difference between the real cost to the payment company and the stated fees gets absorbed into the FX markup. Simply said, the corridor with the higher transfer cost gets a wider spread. Thus, the customers sending money to Vietnam are bearing a margin they cannot even see.

Component 5: The interchange and network fees (for card payments)

If the payment is made with a credit or debit card, there are additional interchange and network fees.

Every card transaction involves a fee paid by the merchant’s bank (the acquirer) to the customer’s bank (the issuer). This is an interchange set by the card networks. It is not negotiable at the individual transaction level. It ranges from 0.5% to 3.5%, depending on factors such as card type, merchant category, geography, and whether the card is present or not.

In addition to interchange, the card network charges a fee for using its rails. And then the acquirer adds its own margin on top.

So when a merchant sees “2.9% + $0.30” from their payment processor, the breakdown might be 1.8% interchange to the cardholder’s bank, 0.15% to the network and the remaining 0.95% split between the acquirer and the processor. The processor’s actual margin on that transaction might be as low as 0.3%.

This is why payment processors do not like to compete on price. The majority of the fee they charge is not theirs to cut. The only lever they control is their margin, which is already the smallest component.

What it means

Payment pricing is how five components, each controlled by different actors with distinct incentives, stack on top of one another.

This has three consequences:

First, price comparison in payments is fundamentally broken. Customers compare the one component they can see (the stated fee) and ignore the ones they cannot.

Second, payment companies that lead with transparency create a competitive advantage. When the entire structure is meant to obfuscate, customers are delighted by transparency. Wise has built a multi-billion-dollar business in large part by making the 2^nd Component (the FX markup) visible. This single design decision has primed the customers to expect transparency and forced competitors to respond. The next company to do this for another component (e.g., float or corridor cost) will likely have a similar advantage.

Third, if you are running a payments company and do not fully understand all five components of your own pricing architecture - how each component contributes to revenue, how customers perceive each component, and where the gaps between cost and price are widest - you are making pricing decisions on incomplete information. Your competitors who understand this will eventually take your customers.