Improving acceptance rates in terms of payment optimization is the one KPI generally agreed within the industry to demonstrate a strategic approach to transforming payment operations.
As progressive companies have evolved over the last decade, they have recognized that payments have shifted from a necessary cost center within a business to a strategic function.
A function that can:
In this article, we explain the payments optimization gap, how to optimize your payments, and how Checkout.com’s integrated payment solution can help.
The payments optimization gap is the value achieved through connected payments, minus the value achieved through disconnected payments, plus the cost of operating and managing an outdated payments system. Essentially, it’s the difference between what you’re doing optimally and what you’re doing sub-optimally, and how you can bridge that gap.
Knowing where to start is the most difficult part when process complexity and lack of insights can hinder you from striving for change. But start you must.
We recommend taking the top five areas you think will make the most difference whether that’s by country, then payment method, or whichever areas that are relevant for your vertical. Start at the top and peel back the layers as if peeling an onion.
That said, there’s no one failsafe recipe because you won’t know until you devise a holistic approach to connect up your payments processes.
If you want to improve your approval rates by one percent, think about where you can find at least half a percent of that. Go after that first. That could be in an area relevant to you whether that’s global expansion and localization or it could be processing cost.
Optimizing your payments requires a strategic and rigorous approach to data and processes. It’s not something you do once. Payments optimization should be an ever-present fixture in your attempts to refine your operations in order to maximize success.
Business data analysis is essential to payments optimization. It’s essentially lifting the hood and inspecting the engine of your operations to see what’s ticking along nicely and what needs to be tweaked and changed.
Data points themselves are useful but not illuminating. To spot where to take action, you need to look for trends. For example, you can use your data dashboard to see how your payment acceptance rate - the proportion of attempted payments that are successful - is changing over time. If it’s unusually low, you need to look for ways to improve it, like improving your fraud detection capabilities.
From a merchant perspective we think that benchmarking is one of the greatest assets that a solution provider can provide. Otherwise you only have your own internal metrics to benchmark yourself against.
That’s why we’ve built our payment processing tool to give you insights on your authorization and chargeback rates or acceptance rates.
Global expansion, local payment methods, and local currency are all part of a localization theme that’s well worth merchants evaluating.
More than half of the US merchants we surveyed agreed with the statement “Payments localization is key to our future growth potential,” with German and French merchants following closely behind.
Yet only 37% of the merchants we surveyed currently offer a full range of alternative payment methods.
Today, accepting local payment methods is a given expectation of customers in every market. In fact, across the US, UK, France and Germany, 35% of consumers use alternative, local methods of payment. In Germany alone, 65% of customers use local payment methods.
When you expand and offer local payment methods you’re often able to reach untapped markets. As you no doubt know, in India, Brazil, Japan and most Latin American countries you perform significantly better if you are a domestic entity operating in those markets. In Southeast Asia, for instance, direct carrier billing is huge for small ticket items which are added to your mobile phone bill.
Having that local method of payment available to a customer also gives them a sense of you being local to their area. Our research found that 56% of consumers would go elsewhere if a merchant did not offer their preferred payment option.
When you think of localization, if you’re going to offer direct carrier billing for instance in Indonesia and you're not able to offer the rupiah, then you can’t connect with potential customers there. They might wonder why they need to pay in US dollars and abandon the transaction altogether.
Of course now, payment providers like Checkout.com offer local acquiring worldwide, which alleviates the need for this level of complexity, but it’s worth noting that these little subtleties can be a big player in your ability to drive improved payments optimization over time. Of those merchants we surveyed, 32% offer local currency options to customers in each region they had a presence.
Thanks to the near-universal adoption of mobile devices, consumers are increasingly expecting to be able to make mobile payments, with use of the technology set to reach 4.8 billion people by 2025. Mobile payments are quick, secure, and because they utilize the device that many of us spend much of our waking life using, extremely convenient. In many countries, younger consumers are even skipping ownership of credit and debit cards entirely and going straight to mobile payments.
Payment Service Providers (PSPs) are the perfect partners for payment optimization strategy, giving you all the tools you need to continually refine your operations. But you need to choose the right one. For example, Checkout.com can help you to improve acceptance rates, fight fraud, and process payments securely, all within one integrated platform that powers your growth.
Tackling fraud and chargebacks is vital to improving acceptance rates and, therefore, optimizing your payments.
Firstly, to cut back on chargebacks, you need to implement a clear return and refund policy, so there’s no confusion around canceled transactions; use easily identifiable billing descriptors, so customers can recognize the transaction on their bank statement; and utilize Strong Customer Authentication through 3D Secure to provide a secure and optimized customer experience.
For fraud, you should make use of powerful fraud detection and prevention software to spot dodgy transactions before they put your business at risk, while increasing acceptance of legitimate transactions. Checkout.com’s Fraud Detection solution combines machine learning and robust rules to do just that.
By choosing Checkout.com as your PSP, it’s easy to incorporate and make permanent all of the payments optimization strategies listed above.
Our integrated solution combines advanced fraud detection with rich, granular data and reporting, and a Unified Payments API that gives you access to all the world’s most popular local payment methods. It’s a fully optimized solution all available in one package that will see you boosting acceptance rates, growing revenue, and providing great customer experiences with ease.