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Friction at the checkout can be the invisible barrier limiting your business momentum. Every cart abandoned due to payment issues represents lost revenue and missed opportunities. Fortunately, the emergence of various payment innovations coupled with access to granular transaction data provides the tools and context to minimize preventable losses.
Payment optimization can be a strategic lever to help you unlock significant gains and fuel your business growth.
What does payment optimization mean, and why does it matter?
Payments optimization is about three core things: improving acceptance rates, reducing fraud and delivering a delightful experience to customers that keeps them coming back to your brand. Payments and sledgehammers never go together. Optimization is a finely tuned thing that requires intelligent tech, high-quality data, and real human expertise.
But consider the impact: a mere 1% increase in successful transactions translates to a tangible boost in your bottom line. Beyond immediate financial gains, payment optimization offers a strategic advantage by focusing on the customer experience. A seamless checkout journey – swift, secure, and adaptable to diverse payment preferences – fosters trust and loyalty, transforming fleeting interactions into enduring relationships. Remember, loyal customers are recurring customers, and recurring customers form the bedrock of sustainable business success.
In today's competitive landscape, every interaction holds significance. By prioritizing a smooth payment experience, you empower your business to thrive.
In the rest of this article, we discuss how to set up your payments strategy to optimize every transaction.
Start by defining your business goals
A successful payments strategy isn't one-size-fits-all. Finding what works for your organization starts with defining your unique business goals and challenges. These may vary based on business model, maturity, and even industry.
For example, established leaders with strong market share and high transaction volumes often prioritize cost optimization and margin improvement across payments. Similarly, financial services companies focused on pass-through revenue prioritize strategies that maximize margins. By efficiently routing traffic through multiple PSPs based on cost optimization, they can effectively maximize profit from each transaction.
Emerging businesses, on the other hand, are in a different phase of the lifecycle. Their primary focus is often accelerating growth, acquiring market share, and securing investment. For them, smooth customer experience and conversion optimization take center stage. Every percentage point increase in acceptance rate translates to significant top-line gains.
It is important to work with a payments provider that recognizes these diverse needs and works with you to tailor a strategy that meets your specific goals. Whether you're striving for optimal margins or explosive growth, a good partner will help you navigate the complex landscape and achieve your objectives.
Map your payment strategy to your business model
To truly tap into the potential of payments, you need a payment strategy tailored to your unique business model and operational DNA. What fuels a rocket launch isn't what powers a submarine, right? So, why force-fit generic solutions? Look for a payment provider that offers flexibility and the right tools for your specific mission. Let's dive into some common business models and see how they can inform your payments strategy.
Subscription services: Safeguarding recurring revenue
Recurring payments are the lifeblood of subscription-based businesses. Account Updater products, like those offered by Checkout.com, act as revenue shields. As a customer have you ever lost a card and then had to update all your subscriptions to avoid chaser emails and calls because the company has had a declined payment from you? As the subscription company you’ll know how painful this process is not only for your customer but also for your finance department.
With Real-Time Account Updater businesses can seamlessly update payment details on major card schemes ensuring uninterrupted subscriptions, safeguarding customer loyalty and maximizing earning potential. Indeed we have seen merchants recover up to 30% of previously forever lost revenue due to expired cards, account changes, or lost and stolen cards by using Real Time Account Updater.
Pass-through revenue models: marginal improvements for sizeable gains
Payment facilitators and marketplaces operate on thin margins, making cost reduction paramount. With Network Tokens issued by card schemes, these organizations can leverage lower interchange fees and optimize their margins. Using a tokenized value also helps protect sensitive data across stages of the payment flow, and can improve authorization rates by 2% or more. That’s a win-win for thin margins.
Expanding horizons: Accessing new markets seamlessly
A 2023 Checkout.com study revealed that 32% of merchants lack proper cross-border payments support which they say is blocking them from entering new markets. This is no surprise since payments regulations are complex, ever-changing and vary from market to market. But payments localization need not be a black box. Look for a payments partner that leverages AI to choose the best path for each payment based on the unique regulatory needs of each market and who offers local acquiring to ensure the lowest cost and highest acceptance rates on cross-border payments in your major global markets.
Unleash the power of your payments data
For most merchants, payments should be a critical business priority. Yet, a surprising number lack clear visibility into how their payments perform across the entire transaction journey. Checkout.com research shows that many merchants are missing critical payments analytics required to optimize payments - whether that’s raw response codes on failed payments, fraud or chargeback analysis data, or a detailed breakdown of payment costs.
By harnessing comprehensive data, you can gain visibility into your payments performance and identify opportunities to optimize your strategy. Understanding the root cause of transaction failures, allows you to proactively address issues like declined payments and improve authorization rates. Reviewing 3DS protocols used across transactions, including which 3DS requests were mandated will give you an understanding of the performance of fraud rules. Compare results with control groups to quantify the effectiveness of your overall payments strategy, and make adjustments where necessary.
Beyond simply processing payments, a trusted partner should provide you with transparent data, as well as expert guidance to make sense of it. This includes granular transaction details, detailed cost breakdowns, visibility into fraud and chargebacks, and all optimizations applied for intelligently routed transactions. A dedicated team of payments specialists can empower you to interpret data and translate insights into actionable steps that drive tangible results. This allows you to gain complete visibility, uncover hidden opportunities, and unlock the full potential of your payments strategy.
Align to issuer preferences
Issuer preferences add yet another layer of nuance to the payments process. Each issuer will have its own risk strategy that will influence its acceptance appetite and preference for certain programs.
Consider, for example, Network Tokens. These powerful tools deliver cost reductions and improved authorization rates in many markets. However, issuers in China, France, and the UAE, among others, haven't yet fully embraced them. Sending a Network Token to an unsupported issuer could result in a declined transaction.
Various issuers and schemes also have specific format preferences for submitted payment data. Even minor formatting errors in customer billing information, for instance, can lead to rejections. Conversely, including optional data points like challenge preference indicators or exemption types can significantly improve transaction success.
An intelligent Payment Service Provider (PSP) recognizes and leverages these intricacies to your advantage. By dynamically routing transactions based on issuer preferences, a PSP can simultaneously optimize costs through minimized interchange fees and maximize authorization rates, leading to smoother payment experiences for your customers and more revenue for you.
Fight fraud and chargebacks
Disputes and fraud are a part of every business. Our research shows that in 2022 more than $50 billion was lost in false declines in four markets alone. But how do you minimize this risk while staying vigilant in your fight to protect against fraud?
Fraud needs to be defended for compliance reasons but it also needs to be mitigated to cut back on disputes. A dispute occurs when a customer challenges a charge on their account, which can result in the issuing bank granting a chargeback. Your goal should be to quickly identify risky transactions while preventing false declines and resolving legitimate disputes. By working with an Innovative PSP, you can leverage an evolving set of fraud protection tools and dispute resolution processes to do this without the operational burden that grates at your bottom line.
Sophisticated machine learning models exist to identify and block fraudulent transactions at the pre-authentication stage, but also make sure to customize fraud rules to suit your risk appetite and business goals. Check with your PSP if they offer a solution that automates the dispute resolution process, freeing your team to focus on strategic initiatives. For example, the Verifi solution by Visa can be used to automatically resolve disputed transactions before they turn into chargebacks. Disputes moved into a pre-dispute stage are resolved with an automated credit to the cardholder based on the rules you set and do not count toward your chargeback ratio.
How Checkout.com can help you optimize your payments
Discover a performance-driven partnership with Checkout, where we go beyond the industry noise. In a world saturated with claims, we show measurable gains. Our payments experts can help you devise the optimal payments strategy, tailored to your business goals.
Our portfolio of products is comprehensive and provides full coverage for payment optimization, from boosting payments leveraging our Network Tokens, and Real-time Account Updater products, to protecting revenue with Fraud Detection and Dispute resolution. Intelligent Acceptance is an AI-powered optimization engine, trained on billions of transactional data points from Checkout.com’s global network and direct relationships with issuers and schemes. The product boosts acceptance rates by intelligently routing transactions across the payment flow, including pre-processing aspects like messaging & routing and post-processing with adaptive retries.
Our products work interoperably to unlock more and more value at the touch points that matter to your business. Intelligent Acceptance can be combined with Authentication, Network Tokens and Real-time Account Updater, and will select the payment path that has the highest chance of success. For example, applying network tokens only when preferred by the issuer, or selecting the SCA exemption channel route that maximizes results and revenue. Intelligent Acceptance can be set up based on business goals, such as optimizing conversion, cost or ensuring the highest levels of compliance. Whatever your goals, Checkout.com’s payments experts are always available to guide you on setting up your strategy for optimized payments.
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