The number I never hear mentioned in crypto terminal pitches is 15 to 20 percent.

That's the annual churn rate in merchant services portfolios. Industry standard. Documented. Not a worst-case scenario — a normal operating condition for anyone building a residual income business in payment processing.

I mention it because I think the silence around it does more damage than the number itself. When people find out churn is real after they've started building, it feels like something was hidden from them. It wasn't hidden from me. I went in knowing it. And it hasn't materially changed how the math works.

Here's the honest version of the conversation.

What Churn Actually Means

Churn, in plain language, is merchants who stop processing — for any reason.

The most common reason is business closure. The U.S. Bureau of Labor Statistics puts the small business failure rate at approximately 20% within the first year and 45% within the first five years. That isn't a crypto-specific problem. It's the baseline risk profile of the small business economy. Any business you place a terminal at is a small business. Some of them will close.

The second reason is voluntary switching — a merchant decides to use a different processor. This happens, but it's rarer than most people assume. Payment systems are sticky. Switching involves new hardware, new integrations, staff retraining, and a disruption to operations that most owners avoid unless they have a compelling reason. The crypto terminal specifically creates additional stickiness because it serves a customer segment — crypto-paying buyers — that no other payment system captures. A merchant who has seen crypto transactions doesn't voluntarily walk away from them.

The third reason is volume decline. A merchant doesn't close but processes significantly less — maybe they changed locations, lost a key employee, shifted their product mix. The account stays active, but the residual shrinks.

When the industry talks about 15 to 20% annual churn, it's primarily the first category. Businesses that close. Not businesses that leave you.

What 15 to 20 Percent Actually Looks Like at Portfolio Scale

Start with 20 merchants. That's a reasonable target portfolio — achievable in a year of consistent work.

At 15% annual churn, you lose 3 merchant accounts per year. At 20% churn, you lose 4.

Three to four accounts per year. That's roughly one every three to four months.

To hold your income flat, you need one new placement every three to four months. Not one per week. Not one per month. One per quarter.

If placing a terminal requires an initial conversation with a merchant, a follow-up to walk through the setup, and a brief onboarding session — and in most cases that's the full scope of work — then maintaining a 20-merchant portfolio requires something in the range of four to six hours of active effort per year.

That is the honest version of "some of our reps have not written a deal in five years." Beacon Payments says that about their most established agents, and it's accurate — but the accurate context is that it describes a mature portfolio where churn has stabilized and replacements happen infrequently. It's not a description of year one.

Comparing Churn to What You Already Know

If you've looked at rental real estate as a passive income vehicle, you have a useful reference point.

A tenant who leaves a rental property doesn't just subtract rent from your income statement. They require the unit to be re-leased — which involves advertising, showing the property, screening applicants, and often a month or two of vacancy. Many landlords pay a leasing agent one month's rent as a placement fee. Then there's turnover maintenance: paint, carpet, appliances, repairs from the previous tenant. A single tenant turnover in a mid-range rental can cost $3,000 to $8,000 in direct expenses plus lost income during the vacancy period.

When a merchant in your portfolio closes, you lose the residual from that account. That's the full cost. No re-leasing expense. No repair bill. No vacancy period where the space sits empty and the mortgage still comes due. The other 19 accounts in your portfolio keep processing while you have one quiet conversation with a new merchant to replace the closed one.

The cost structure of merchant attrition is fundamentally different from the cost structure of property vacancy. The comparison favors the payment model significantly.

"What If Several Good Merchants Close at the Same Time?"

This is the right question to ask, and it has a straightforward answer: portfolio diversification.

A 20-merchant portfolio concentrated in one industry vertical — say, all restaurants — carries genuine correlated risk. A neighborhood that gets hit by a major employer leaving. A winter that kills three seasonal restaurants. An economic event that affects discretionary spending in one category.

The same portfolio spread across six or seven verticals and multiple neighborhoods doesn't have that exposure. If two restaurants close in one part of town, the auto repair shop across the city is unaffected. The electronics retailer is unaffected. The specialty food market is unaffected.

The portfolio construction principle here is simple and familiar. You don't put all your accounts in the same vertical. You don't concentrate in one zip code. You build a spread across business types and locations because different businesses fail for different reasons at different times. A well-diversified portfolio of 20 merchants is unlikely to lose five accounts in a single quarter unless something catastrophic happens to the entire small business economy — at which point the churn problem is the least of anyone's concerns.

The Honest Position on Portfolio Stability

Here is what I can say honestly, based on the model and the math.

A portfolio of 20 merchants, diversified across verticals and neighborhoods, with 15 to 20% annual churn, requires three to four replacement placements per year to hold income flat. That is a maintenance burden that fits inside a few hours per month for someone who knows the conversation.

It is not passive in the strictest sense during that maintenance phase. Nothing with moving parts is. But it is dramatically less labor-intensive than any other income-producing asset I've studied — and the attrition cost when you do lose an account is lower than any other model I've compared it to.

Gedam Tekle is a former U.S. Marine and Oakland Police Sergeant who left law enforcement to build crypto payment infrastructure businesses. He has personally exited two eight-figure companies and helped over 4,000 entrepreneurs build residual income. He is the founder of Dividend Shift.