Closing the optimization gap: how to illuminate and unlock the true power of payments data

If data is the new oil, then payments data is the new, extra virgin olive oil. It’s rare yet valuable as it can be analyzed for insights to drive real bottom-line benefits. Manuel Huez, our VP of Product, explains how.

Transparent access to quality payments data provides the insights to optimize conversion and reduce the cost of payments. It’s also what enables some of the world's fastest-growing businesses to put payments at the core of their corporate strategy. Plus, use it to drive business transformation and revenue growth.

But most companies are struggling to access even the most basic payments data. Our research with Oxford Economics revealed that 65% of merchants receive no fraud and chargeback analysis or detailed response codes on failed payments. Nearly half are not getting granular detail on the cost of their payments.

In the second installment of our LinkedIn Live mini-series, exploring how to unlock the full value of payments within an organization, I spoke with Manuel Huez, our VP of Product, to find out how to use data to close the payments optimization gap.

What are the barriers to better data?

For Huez, the historical lack of access to good payments data is not surprising. Processing online payments used to involve so many players from gateways to acquirers, processors and others in-between. “Because merchants didn’t have any control over the connections, they couldn’t control the data itself. When they got a decline, they had no visibility over the actual error codes coming from the banks.”

Different players are now integrating forward and backward in the value chain. Many offer end-to-end payment solutions, meaning they are the gateway, acquirer and processor all-in-one. “When you have the raw output coming from issuers and the schemes, payment service providers have access to all the data, meaning merchants can, too,” explains Huez.

Data may be the new oil, but unrefined, it has little value. Just as oil has to be turned into something else – gas, chemicals, plastics – to be useful, so it is with data. So, the opportunity of better data is better insights to drive payment strategy.

What’s particularly exciting is the increasing availability of ‘smart routing’ and ‘orchestration’ tools. These allow merchants to optimize their payments strategy based on the data they uncover. So, companies of all shapes and sizes can unlock huge benefits from better payments data and insights.

Where should organizations wanting better insights start?

There are no silver bullets in payments. Payments data is complex by definition. Local nuances also have to be considered. So, what are some low-hanging fruit with quick, measurable impacts?

Firstly, look at error codes. Analyze these over time to understand why issuers are declining transactions. Is it because you’re not able to process certain transaction types? Is there a large proportion of fraud-related declines? Perhaps you’re getting declines because you’ve been flagged as a risky merchant, which can have a huge impact on your payments performances, says Huez.

Secondly, look at your authorization rate — that’s the number of transactions accepted divided by the total number of transactions. “Knowing whether this is going up or down is one thing. Splitting and segmenting this in a way that makes sense for your business can really inform your payments strategy, for example, by cardholder country, type of card or scheme. You can also segment by the type of payment you're receiving, be it a one-off, recurring, one click and so forth,” advises Huez. 

How can payment providers help?

Most merchants don’t have the data, budget or resources of an Uber or Netflix. So, to what extent can they lean on their payments providers rather than build data system capabilities themselves?

“For me, it’s linked to the ability of PSPs to give merchants access to their payments data. If your payments provider is end-to-end and has built what it needs from scratch, there are likely to be fewer platforms, fewer hops.” 

This means there’s little-to-no data erosion. So, it’s not like moving from a giant straw to a smaller straw to a coffee stirrer, where data gets squeezed out. An end-to-end payment provider with modern systems can capture, store and pass all the data.

You also need to build a good, trusting relationship with your PSP. “Even though they may have access to end-to-end payment data, they may be unwilling to share it if their performance is poor. If your PSP sees that you can work together to optimize your payments strategy, that’s meaningful,” says Huez.

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Keep up-to-date with all things payments

The Checkout.com team

Written on Mar 11, 2021 by

Julie Scrase

Senior Editoral Manager, Checkout.com

Keep up-to-date with all things payments

We process your personal data in accordance with Checkout.com's privacy policy. By subscribing, you consent to us sharing updates with you.

Keep up-to-date with all things payments

The Checkout.com team

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