How can payment optimization tools help e-commerce businesses unlock hidden potential?
Online merchants have long known that beyond every successful transaction, there are countless abandoned carts, declined payments, and other would-be sales that can add up to significant lost revenue over time.
Meeting customer needs and converting the sales opportunities they present is critical to maximizing e-commerce success. Nearly 70% of shopping carts are abandoned, representing billions of dollars in lost sales opportunities. Add in the impact of falsely declined payments (estimated yearly at $430 billion) and the importance of optimizing payment transactions becomes even more clear.
Luckily, payment providers are responding to this challenge with a host of payment optimization tools that help increase the volume of successful transactions and deliver a great customer experience.
What is payment optimization all about? And how can merchants implement state-of-the-art payment technology while maintaining frictionless global payments?
Keep on reading to find out more.
Why is Payment Optimization Important?
8 Best Practices for Optimizing Global Payments
1. Optimize payments for mobile
2. Adjust payment methods to the local market and product offer
3. Get a comprehensive analytics dashboard
6. Save failed transactions with instant retry
7. Fight fraud while maximizing profit
8. Use the latest technologies
Summary: Find Hidden Revenue and Boost Profits via Payment Optimization
Payment optimization is the use of advanced payment technologies and tools for improving the checkout experience and staying ahead of competitors.
Consumers today have no shortage of options when it comes to making payments. Merchants therefore need to grasp what this means to their business and see how they can optimize their approach to payments – both to control costs as well as drive incremental sales.
Merchants are under pressure to simplify the payment process, attract new customers and keep existing customers happy. Consumers, especially Millennials and Generation Z, have high expectations regarding their shopping experience. They want to complete the entire process quickly and efficiently, whether online or in person.
From local credit card brands and banks to e-wallets and other alternative payment methods, the most successful stores offer the right mix of payment method options to reach the broadest possible range of consumers. As technology advances rapidly and consumer expectations change, merchants need to ensure their checkout process meets these needs.
At the same time, many online merchants – particularly those who are in the midst of expanding rapidly or are operating in multiple markets – are often unaware of the full extent of potential revenue they are losing simply from below-average payment approval rates.
Low approval rates are the result of many factors in play such as unoptimized flow or lack of support for relevant payment methods.
Another common issue is legitimate payments getting falsely declined. False declines are connected to the anti-fraud solution used by the merchant, issuer, or acquirer. While fraud filters exist to protect both consumers and merchants from genuinely fraudulent and dangerous transactions, fraud algorithms can sometimes cast too wide of a net and decline payments due to a number of triggers including IP location, amount of the transaction, and other criteria that might not actually be suspicious.
Declined payments are especially heartbreaking for an online merchant because the merchant has successfully gotten their customer to complete the entire sales journey – yet the sale falls through at the last minute because the customer is unable to pay, gets frustrated, and moves on. Since many merchants do not necessarily have a birds-eye view of each and every declined payment, they may not even realize the extent of this problem.
So how can merchants ensure higher rates of conversion at checkout, while also recovering lost revenue by boosting payment approval rates and battling false declines?
This is where a robust payment optimization strategy comes in.
Mobile commerce is a crucial channel for merchants who sell to Gen Z and Millennials. Gen Z converts via mobile twice as much as other generations.
Merchants should make sure to offer shoppers the payment methods they seek as part of a mobile-friendly user experience – whether they’re browsing catalogs on their phone or checking new products on a tablet. Don’t lose a customer because their preferred payment method wasn’t available or the e-commerce checkout experience wasn’t mobile-friendly.
To increase mobile conversion rates, merchants should ensure that the payment page design is optimized and that the checkout experience is equally user-friendly on mobile as well as desktop. With consumers spending more time on mobile devices of all different types and sizes, merchants need to have a dedicated interface for each type of device, rather than cramming all payment method options into one small screen.
Merchants should always offer payment methods that make the customer’s life easier. By providing a variety of global and popular local payment methods such as BNPL, digital wallets, and other popular APMs, business owners can improve conversions in domestic markets and successfully expand geographically.
For example, for stores with expensive items, installment payments should always be a part of the payment method mix. Installment payments are often a market-driven payment alternative – for example, they are extremely common in Argentina.
Merchants who sell shareable items, meanwhile, often provide split-payment terms to help customers in settling the payment with other people.
What about items that people purchase frequently? Consider offering a subscription payment option and recurring payments. Another popular option is One-Click Payments, a quick and easy way for customers to finalize payments by reusing the card information data they have accepted to be collected and saved by the merchant.
Match the payment method to the context to make the checkout experience instantly more appealing.
Extracting quality insights from fragmented payment infrastructure is challenging. A holistic analytics dashboard allows merchants to identify which areas require optimization and doesn’t force teams to jump between multiple platforms to gather data and generate reports.
An advanced analytics dashboard can give a full overview of global payment transactions regardless of the complexity of the business or the number of countries in which a company is operating.
With the help of an all-in-one, real-time analytics, merchants can integrate and analyze payment data from around the world, identify hidden insights from the payment journey, and use them to optimize sales and revenue.
How can merchants increase the percentage of transactions submitted vs. accepted by the cardholder’s bank? The best way to increase approval rates and reduce the percentage of declined transactions is by processing payments locally.
Merchants should work with a payments provider (or partner) that has local acquiring capabilities. By acquiring locally, merchants will enjoy higher card authorization rates, lower scheme and interchange fees, and faster settlement. Adopting a locally-focused acquiring approach can also help to avoid international fees and costs.
Furthermore, merchants implementing a local acquiring approach usually see higher payment approval rates.
Another clever payment optimization technique is working with a global payment solution provider that can provide smart routing capabilities, making it possible to route transactions through different payment providers and sub-providers to optimize approval rates and lower transaction fees.
PayU offers a US-patented smart routing engine with more than 100 routing configurations to ensure that clients meet their business objectives easily. Merchants can base routing rules on different configurations such as issuer, geographical location, transaction amount, and more. Merchants can adjust these rules at any time and almost instantly see their effect on revenue and transaction margins.
An innovative routing engine that enables payment managers to create rules for routing payments to the most optimal provider is a must-have. That way, merchants can ensure that online payments deliver the best possible business outcome.
One key capability of a good routing engine is the ability to retry declined payments. What happens in the event that a provider receiving a transaction request fails to process the payment transaction?
Rather than losing out on a potential sale, one option for merchants is to re-route the payment through another provider. Automating this process via configured rules is one option online merchants have to optimize payments and boost approval rates without the need for any manual intervention.
Merchants should look for a payment provider that can provide an automated retry function for better approval rates and fewer declined payments. A good example is PayU’s Instant Retry Feature, which saves failed transactions by processing them via a pre-configured set of routing rules.
Falsely declined payments are a menace to any online merchant. With a good retry feature, merchants can salvage transactions lost due to technical errors or false declines while making checkout more seamless and improving the customer experience.
The balance between maintaining frictionless payments while still maintaining high levels of security and preventing fraud is a delicate one. With the number of online transactions only continuing to grow, fraud is one of the biggest challenges within the e-commerce space. Merchants need strategies to manage risk and block fraudulent transactions.
However, many of these systems, especially the more conservative ones, may end up blocking genuine transactions, leading to the issues with false declines and lost revenue explored above. Particularly as fraud technology becomes more sophisticated, a good fraud detection capability must be able to root out genuinely fraudulent transactions with a level of precision that can ensure legitimate payments are not affected.
By choosing a payment solution provider with a sophisticated approach to payment security, merchants can guard against fraud while at the same time ensuring that payments are processed seamlessly.
Before moving forward with a provider, merchants should be sure to understand the provider’s payment security capabilities and particularly how well the provider is able to filter between legitimate transactions and those which are illegitimate.
Merchants should not consider the implementation of 3D Secure as a one-size-fits-all, but instead adopt a segmented approach based on the facts on the ground. For example, at PayU we provide 3DS-tailored approval rates strategies and apply a 3DS optimization strategy based on payment data.
PayU has a dedicated approval rates team that monitors, analyzes, and applies improvements based on data – whether 3DS-related or when it comes to optimizing other aspects of your payment environment, we support merchants in leveraging data and analytics to improve payment performance.
As global payments become more complex, technology is also evolving to help merchants keep up. In order to successfully optimize payments, merchants should look for a payment provider that employs the latest payment technology features.
Two essential examples are 3D Secure and network tokenization.
3D Secure 2 is a payment protocol which allows issuers to access ten times as much transaction information as before. This results in more precise risk analysis and more accurate cardholder profiles – and fewer false declines. Both merchants and issuers increase profits and keep their customers satisfied.
Network tokenization is helpful here as well. Network tokenization allows for even more security than ordinary tokenization, helping to drive higher approval rates.
Tokens used in this method achieve higher approval rates and capture higher transaction volume by avoiding lost and/or expired card declines, while providing more information and greater visibility to card issuers during payment authorization.
Network tokenization also helps to increase transaction security and enhance customer experience through an improved transaction flow.
Payment optimization is about taking advantage of everyday payment data and transforming it into strategic insights that can increase revenue and boost profit margins while reducing unnecessary expenses and delivering a better experience to customers.
For merchants, it’s crucial to select a global payment provider that enables the best possible features in payment optimization. With the right payment optimization strategy, the results will become clear in the form of e-commerce revenue that you didn’t even know was there.