How does payment analytic data help merchants?

The ability to leverage payment data through advanced analytics helps merchants improve business strategies and drive e-commerce growth.

In the world of e-commerce, peak season comes with unique challenges. Handling sudden bursts of traffic and transaction load places a lot of demand on operations teams. However, major e-commerce events also present an opportunity for merchants to increase their revenue and drive engagement with more customers than during regular times. 


How are high-performing e-commerce businesses using payment analytics and AI to improve payment processes and prepare operations for future peaks?


Keep reading for an overview of the most impactful areas of payment optimization that benefit from these innovative technologies.



Table of contents

How payment analytics and AI help to build success in e-commerce

Optimizing the checkout process

Improving authentication for a safer shopping experience

Summary: AI in payments will only grow

How payment analytics drive e-commerce growth PayU cover image

How payment analytics and AI help to build success in e-commerce

Analytics powered by AI and machine learning technologies are a great match for e-commerce businesses across every industry. According to McKinsey, payment providers using machine learning stand to increase revenue from existing customers by 10 to 15% via new opportunities for upselling and cross-selling and improved customer segmentation. 


Online payment processing is no exception, as AI solutions deliver value at different stages in the payments value chain – from approval rates and fraud detection to a better checkout experience



Boosting payment performance

False declines are one of the most expensive mistakes of an e-commerce business. When a customer’s payment is incorrectly rejected after they initiate the transaction, the customer is far more likely to abandon their cart and turn to competitors. 


Even though a majority of merchants have implemented advanced analytics such as churn rates and lifetime value, AI-based algorithms can correctly identify and flag true anomalies, replacing the rule-based system with a far more accurate solution.


As a merchant, if your approval rate is below 90%, it’s time to take action. First, understand why online transactions are failing, and this is where response codes come in handy. Make sure that your payment service provider shares these data points with you – or, better, use them to solve this problem automatically using sophisticated AI algorithms.


The PayU payment orchestration platform features analytics tools that help merchants keep track of payment approval rates by card countries, currencies, payment methods, and issuing banks and identify trend and year-over-year growth by using the historical data.



Handling segment-related peak season challenges 

Some merchants may experience high volumes of relatively small payments to process during peak season. They need to have the right infrastructure to manage this extra load. Meanwhile, high-end and luxury e-commerce segments observe the reverse: fewer expensive transactions from wealthy buyers. 


To solve both peak season scenarios, merchants need to ensure that their payment service provider can address the following issues: handling a large volume of online payments gracefully, while also supporting a broad range of payment methods.


With PayU’s payment orchestration layer and robust smart system, merchants can manage peak season efficiently while also providing a great checkout experience.



The benefits of local acquiring

Merchants looking to increase their approval rates should also implement a local acquiring strategy in key markets. Local acquiring gives you a competitive advantage in reducing processing costs and improving authorization rates. Again, this is a service you can expect from a payment service provider using innovative technologies.


Finally, merchants should refine their retry logic if a payment fails due to a technical error, such as a timeout. PayU’s platform includes the Smart Routing Engine – an end-to-end routing solution that lets merchants route payments to their optimal payment provider, perform A/B testing of the providers’ performance, and boost performance all-around with smart reporting.

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Optimizing the checkout process

E-commerce stores fight for customers in a highly competitive environment and need to differentiate from the rest of the market in every way possible. No wonder merchants are increasingly turning to sophisticated payment methods and systems to build a smooth checkout experience.


By allowing a variety of payment methods and on a device of their choice, merchants can successfully prevent customers from abandoning their cart midway through checkout. As icing on the cake, customers should feel confident their personal and financial data is safe without being inconvenienced by security checks. 


Here are three steps for building a great checkout experience:



Provide customers with their preferred payment methods

Consumer payment preferences may differ between and within regions. Overall, more than half of consumers who cannot use their preferred payment method will likely abandon their cart. A successful advanced analysis of historical data may reveal some interesting insights about users’ preferred payment methods, helping merchants to make sure they offer the right payment method options in key sales markets. 



Optimize the checkout experience for markets and platforms

Localizing the checkout page and processes is an important part of giving customers the best experience (this is where AI and Natural Language Processing capabilities come in handy). With increasing volumes of e-commerce now happening on mobile, the checkout needs to be functional on mobile as it is on desktop.



Automatically fill customer data

To make checking out as easy as possible for the customers, online payment platforms also use caching technologies and Natural Language Processing capabilities such as LAFF automatically fill user information. As a result, when the user makes a future purchase, the information is automatically filled out during the checkout process.

Global Local Payment Methods PayU Website

Improving authentication for a safer shopping experience

Information security and data privacy is imperative for any online payment system. Authentication is a key part of this. Two-Factor Authorization (2FA) provides an extra layer of protection for customers’ online data or account information by asking for further personal information to double-check.


AI makes online payments easier to secure with biometric authentication methods. Facial recognition payments rely on machine vision and big data that power the technology for easier authentication. This allows users to make safe transactions faster, reducing the burden of security checks on their experience.



Enhancing fraud detection

AI became a game changer for anti-fraud solutions used across the financial services industry. The payment space benefits from AI and machine learning systems that help to identify fraud and fight card testing schemes.


Card-not-present (CNP) fraud is on the rise, with merchants reporting more and more issues of first-party misuse, account takeover fraud, and identity theft in the past year. During peak season, retailers must ensure their risk tolerance and fraud prevention strategies are fully refined and implemented. 


Here are two essential steps merchants can take to ensure a payment process free of fraud:


  • Combatting card testing schemes – scammers will use card testing at all times of year but especially at peak season because they know that more sales mean more opportunities for them to commit fraud. Avoid falling victim to these scams by using an AI-powered risk tool that deploys cumulative amount velocity rules such as anomaly detection, allowing merchants to identify spending patterns that are commonly used by bad actors running card testing schemes. 


  • TokenizationNetwork tokens are generated automatically by the card schemes when customers use their cards. A token offers end-to-end security and reduces the risk of malware and phishing attacks because a stolen token cannot be used elsewhere.



Tracking and reporting on payments with data analytics

Finally, there’s one more rich and incredibly valuable area that AI has transformed: payment data analytics. ​​A high-quality payment solution should come with a dashboard showing the summary of all the digital payment data across different stages of the payment flow. 


A data analytics solution also allows merchants to run sophisticated reports displaying the most important data points. PayU’s global payment solution offers predefined report templates while allowing users to generate custom reports in a data format that integrates with other processes.


Merchants can use AI-powered data analytics to compare performance metrics across payment providers and leverage data insights using payment optimization tools to re-route payment traffic and maximize revenue.

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Summary: The role of AI in payments will only grow

Whether consumers realize it or not, artificial intelligence has become part of nearly every aspect of the digital experience. This includes payments when shopping online. With its infinite capacity to learn, adapt and process volumes of data much faster than has ever been possible before, AI plays a major role in securing digital transactions and optimizing payments.


AI-based solutions are already making digital transactions safer and more accessible, expanding to impact every stage in the payments value chain.