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Frequent payment declines are usually a result of some issues in payment processes. For an online business, the higher percent of declines compared to face-to-face sales is naturally higher because it helps mitigate the fraud risks. However, if 10% of transactions are unsuccessful and this number is growing, it is time to optimize payment. Payment optimization includes some analytics, fraud protection improvement, and the choice of a reliable payment processor.
Benefits of optimizing payments
Usually, businesses decide to optimize payments when the decline rate becomes noticeable. There are dozens of reasons a payment can be declined. Some of them are insufficient costs on the account, outdated or incorrect card data, or suspicious transactions with a risk of fraud.
A merchant, however, can manage the transaction authorization rate and reduce it to the average in the industry. If a business starts payment optimization, there are several possible effects:
- Higher legal payments authorization rate;
- Lower fraudulent deals share;
- Lower transaction fees;
- Lower chargeback rate;
- Consumer trust increase;
- Higher merchant rate;
and some minor positive effects.
In general, payment optimization is an important step in the future development of a business. Otherwise, there is a risk for a merchant to get a negative reputation in banks and a significant loss in clients.
How payment optimization works
An ideal payment goes flawlessly, and the payment processing stages remain invisible to the payer and payee. If the process interrupts, sometimes it is enough to repeat the attempt. However, constant interruptions are the reason to investigate the hidden issues in the payment process. Starting with the main metric – authorization rate – a merchant should do some research and find the claws.
We would recommend starting payment optimization by learning the average transaction decline rate in the industry. It is a well-known fact that the authorization rate for online transactions is approximately 10% lower than in shops. The significant number of failed payments can be a reasonable result of fraud protection. If the authorization rate is higher than average and grows, we’d recommend optimizing payment processes.
The frequent reason for transaction interruption is the unstable connection and outages on the merchant’s or the bank’s side. The merchant should choose reliable service providers to protect from outages. It is not actually a part of payment optimization but general business improvement. However, if the connection is constantly good, the payment issues should be somewhere else.
Another frequent transaction decline reason is insufficient funds on the card. A merchant should use analytical software to see the abnormal number of failed transactions because of insufficient funds, and then make a demographic analysis to see if this issue is related to a certain group of customers. If the analysis shows a special auditory that lacks funds for shopping, it is necessary to correct the marketing and advertising strategy.
The next possible issue is outdated or incorrect card information. People use to make mistakes and the payment decline is natural. A merchant can implement some measures to help the customers keep their data up-to-date, like an automated reminder about the upcoming card expiration date. However, the unusual number of such declines can result from stolen credit card usage, which is a reason to review fraud protection policies and tools.
Of course, suspicious transactions also contribute to authorization decline statistics. A suspicious transaction can be repetitive – the attempt of a similar transaction with one card in a short time. Also, a payer location can look like suspicious, or transaction amount. Despite this being a fraud protection tool, many legal transactions fail, leaving the customers irritated.
So, each of these payment decline reasons looks minor, but together they create a cumulative effect, and a merchant can face negative consequences. Payment optimization mitigates the risk of it. A partnership with a reliable payment processor can help in this stage. A payment system that processes transactions is an important part of the payment chain. If it works flawlessly, a merchant can quickly mitigate other related risks.
How to optimize payments — 3 quick ways
#1. Use both international and local acquiring
Just in case, we remind you that an acquirer is an organization that accepts (acquires) payments. For example, a local bank that accepts payment in cash or with a credit card is an acquirer. A recipient is a person or organization that gets (receives) money; here we discuss a bank recipient. A payment processor is a system responsible for money transfers from an acquirer to a recipient, or – on the upper level – from a payer to a payee.
Imagine a small business that works in a relatively small location. All payments are transferred via a local bank and only minor problems can appear. With time, a business scales up and enters the global market. Almost immediately the merchant faces numerous issues related to cross-border payments.
Even in Europe, within the Eurozone, the acquiring bank can reject the payment in euros from another country. When the payment comes in another currency, the risk of decline increases. For local acquirers, it is easier to decline the suspicious transaction than to clarify the details. Another option is to stop the transaction for a couple of days. It is reasonable from the anti-fraud point of view.
However, the delays irritate clients, and most of them blame a merchant, not a payment system. To make international payments easier, many payment systems go to the international level and process cross-border payments without delays and for affordable fees. A partnership with a reliable payment gateway is also a part of payment optimization.
Corytech is a payment system that processes cross-border payments and successfully works for acquirers in different locations. Corytech can be a “sweet spot” for a business that operates on many local markets and flawlessly transfers money from one local acquirer to another.
#2. Offer more payment ways
A credit card is not the only way to pay. It is hard to imagine an online store that does not accept Visa or Mastercard cards, it is a core for online business. However, sometimes merchants lose their clients because of the limited payment methods. If a client cannot find the chosen payment method on the site after completing the checkout process, he or she leaves the site with a very low chance to return.
Consider expanding your payment methods pool. A shop owner can use payment analytics to understand which method is preferable for the clients and predict market trends. For example, if the analytics shows the growing number of NFC payments, it is a reason to purchase more payment terminals.
A merchant should consider giving the customers an option to pay using international payment systems, like PayPal and Wise. Those merchants who work with Amazon should consider Amazon Pay, the native platform payment system. Nowadays the market offers plenty of options.
We’d also recommend adding some international payment systems that are popular among important customer groups. For example, if a merchant works with Chinese customers, it is a reason to consider Alipay and WeChat pay. Using these systems, a merchant can optimize payments for a target location.
If there is no major obstacle, like the national legislation, a merchant should also consider a crypto payment. For many clients, cryptocurrencies solve some personal problems, like the payment restrictions in their country. With crypto, a client can make cross-border payments with a minimal fee and almost immediately.
#3. Employ anti-fraud prevention
Fraud prevention is a core of online payment optimization. As it is mentioned above, the network decline rate for online payment is 10% on average. For offline payments, the rate aims to be zero.
A higher decline rate for online payments is expected with anti-fraud systems working. Sometimes the systems reject the legal transaction, but the majority of declined transactions are fraudulent. So, the system protects a bank and merchants from criminal activity and saves money.
If the merchant does not employ a fraud protection system, the risk of chargebacks and disputes with customers increases. In such disputes the moderators usually take the customer’s side, so a merchant loses money.
It is just the first problem in the lo list. Thus, with the growing chargeback rate and the number of disputes, the merchant’s rate goes down. New customers start avoiding this shop because they are afraid of scammers. The turnover shrinks, and the profit decreases.
A merchant can set up numerous policies and software for fraud prevention. There are tons of great options available. Currently, the latest trend in fraud protection is machine learning. The algorithm analyzes the customers’ behavior and defines any untypical transaction.
To mitigate fraud-related risks, a merchant also should find a reliable payment processor. Sometimes the poor fraud-protection system in payment processors results in a growing transaction decline rate and all related problems. Corytech uses a multifactor fraud protection system and ensures a high authorization rate for its clients.
Corytech offering for payment optimization
Corytech is an innovative fully-featured platform that can solve many payment-related problems. This all-in-one service can make payment processes in your company or organization flawless without spending capital.
The main service of the Corytech platform is a payment gateway. The platform can process payments in crypto and traditional currencies. It allows the partners to add new payment methods for their business. The variety of payment methods contributes to payment optimization.
The set of anti-fraud measures and policies minimizes the risk of fraudulent transactions. The well-tuned anti-fraud system saves money and minimizes the chargeback rate which creates a positive merchant history for banks and customers.
Among other services, Corytech provides a payment analytics function. It helps to find the claws and bottlenecks in the payment process, collect and process information about the customers, and get valuable business insights.
Corytech platform is easy to download and set up and use, without hiring an engineering team. Also, the flexible pricing scheme makes the platform affordable even for small businesses.
Payment Optimization FAQ
Can optimizing payments for mobile help in the overall payment optimization process?
Optimizing mobile payments definitely will improve an overall payment optimization process. The impact can differ, it depends on the mobile payment share in a business. However, more than half of global internet users use mobile gadgets to access the internet. It means that mobile payment optimization is a must for each business.
How to increase authorization rates?
Investigate the average authorization rate for your industry and make sure your rate needs improvement. - Know the main reasons why your transactions have been included. - Сollect more data on your customers and target your marketing efforts on the groups with a minimal decline rate. - Consider changing your payment provider and choosing a reliable partner with a strong fraud prevention system, like Corytech.
What’s Next?
Payment optimization is a set of actions, processes, tools, technologies, and decisions that make the processing of payments smoother for the customers, mitigate fraud, reduce transaction costs, and improve the payment process.
At the first glance, payment optimization looks like a minor priority task. However, a business can lose many clients because of the payment claws. Most customers abandon shopping when they face the payment problem and leave for other merchants.
A business can optimize payments in numerous ways but it can be a tough process. It is necessary to analyze the payment process and find the claws and bottlenecks. The demographic analysis helps increase the transaction authorization rate. Cooperation with local and international acquirers also can positively impact the transaction decline rate. More tools and technologies can be used because the market provides plenty of options.
Corytech can help optimize payments and make this tough process easier. Corytech cooperates with different businesses, from small-size to enterprises. This innovative fully-featured platform provides an analytic module, flawless connection with local and international acquirers, and provides high-level anti-fraud protection.
Contact us and request a personal demo to see how Corytech can optimize payments in your business!
