Today, businesses across all industries are perpetually on the hunt, aiming to boost their sales and increase revenue. Within this never-ending process of developing innovative customer journey strategies lies a frequently overlooked yet pivotal stage: payment processing. This critical stage in the sales cycle often remains neglected, overshadowing its significant potential to influence the customer's purchasing decision. Yet, the truth is that if a customer proceeds to the payment page, it doesn't mean they intend to complete the purchase. It's at the payment stage where the final decision will be made.
According to the 2024 Cart Abandonment Rate Statistics released by Baymard Institute, the average documented online shopping cart abandonment rate is 70.19%. The data shows that only one in three shoppers who make it to the checkout actually follow through with their purchase. Furthermore, one out of five shoppers abandoned a cart in the last quarter due to a long and complicated checkout process. The loss of profits it causes businesses every day is staggering.
Now, consider the potential surge in revenue businesses could achieve by channeling their resources into enhancing payments at the top of the pipeline. But how? The answer lies in optimizing payment processing.
Founder of Akurateco.
The anatomy of payment processing: Three critical stages
When it comes to optimizing payment gateways, there are three critical stages: pre-processing, processing, and post-processing. Each of them must be handled properly to avoid losing clients, as potential pitfalls exist at every step of the way.
1. Pre-processing begins when the customer lands on the checkout page. Here, they make a final decision on whether to proceed with the payment, influenced by what is displayed to them.
2. Processing speaks for itself. This stage begins when the customer submits their payment data and concludes once the data is verified, and the transaction is completed. This step needs to be smooth and quick since any delay or error can cause frustration and lead to cart abandonment.
3. Post-processing: After the payment goes through, this stage covers everything that follows. Additionally, it presents a chance to analyze the transaction and leverage this information to refine payment processing in the future.
Optimizing customer payment journey: Strategies and tips
Optimizing the payment journey at each stage requires unique strategies. Let’s uncover them step by step.
Step 1: Simplifying pre-processing
By the time a customer reaches checkout, their digital footprint has been already mapped out. From the geolocation of their IP address to stored payment details and preferences, businesses have a wealth of information at their fingertips. This data doesn't have to sit idle. It can be used to craft a checkout experience tailored to the customer's needs. What’s the result? A payment page that presents only the payment options customers expect to see, making their purchasing experience as convenient as possible.
Minimizing the interactions required to make a payment is another strategy to implement. When only a decade ago, customers were eager to input their full payment details to complete a purchase, the scenario has dramatically shifted fast forward to today. According to the research, 22% of potential customers abandon their carts due to lengthy and complex checkout processes. Thus, for businesses aiming to retain customers, simplifying the checkout process is not just beneficial — it's essential. This can be achieved with 3DS 2.0's streamlined security and network tokens. It’s also important not to ignore mobile payment methods like Apple and Google Pay, considering their increasing prevalence around the world.
An additional point to keep in mind is that the payment page navigation must be intuitive, simple, and clear. While smooth transactions are the goal, it's also worth anticipating a situation where some issues arise during credit card processing. In this case, customers should be able to find their way back to the payment page with a single click. The clarity in navigation ensures that users are not left in the dark regarding their funds and the transaction's progress, reducing the likelihood of cart abandonment because of confusion or frustration.
Step 2: Optimizing processing
With payment methods fine-tuned and the payment page’s usability enhanced, the focus shifts toward the processing stage itself. This is where businesses have the opportunity to tailor the payment flow, striking a delicate balance between meeting customer expectations and serving their own needs.
By harnessing insights about the user and their chosen payment method at checkout, businesses can leverage payment routing technology to direct transactions along the most efficient path. In this way, when a customer enters their payment data and makes a payment, their transaction goes to the most suitable payment provider. The criteria for routing include a range of parameters such as transaction fees, the speed of funds transfer to merchants, currency exchange rates, and others. Moreover, routing parameters can be either static, predefined before payment processing, or calculated, adjusting dynamically as conditions change.
Yet, some transactions will still be declined by payment providers. While these failed payments might initially appear like a lost cause, many of them can be processed successfully, saving the business both revenue and customer loyalty. To achieve this, a cascading mechanism comes into play. Engineered to seamlessly redirect a transaction declined by one provider to another within a single payment attempt, this technology ensures uninterrupted payment flow, increasing transaction approvals by up to 30%.
Addressing payment fraud is another critical challenge businesses can tackle during the processing phase. For this, they need to implement additional security measures, such as anti-fraud filters and user verification measures like Know Your Customer (KYC) and Know Your Business (KYB), tailored to the specific needs of their business sector and their customers' location.
The most effective way to deal with payment fraud is to use simple rules. For example, limit the customer to make more than a certain number of transactions from the same card or email or cross-reference their location with the BIN (Bank Identification Number) geolocation. Payment systems can host a plethora of such rules, which can be integrated together to provide comprehensive fraud protection. Businesses can also leverage specialized anti-fraud services offered by third-party companies with expertise in various business domains and geographical areas, benefiting from vast databases of information on fraudulent transactions to develop models that assess the risk score of each transaction.
Step 3: Gaining insights from post-processing
Once a transaction is successfully processed, it might seem like the heavy lifting is over. Yet, the post-processing stage is equally crucial. At this point, customers may request a refund. Businesses must address these requests promptly to prevent them from escalating into chargebacks, which bring banks directly into the fray, leaving merchants completely out of the loop.
The amount of refunds and chargebacks is regulated by payment systems. If this rate exceeds the acceptable limits, merchants may face significant risks, including the potential termination of agreements with payment partners and the freezing of funds. Therefore, it is better to keep chargebacks and refunds to a minimum. For this to happen, merchants must be able to receive information about a potential chargeback on time. Following this, it’s imperative for a business to decide on the appropriate course of action: whether to accept the chargeback or contest it, ensuring they have the necessary tools for effective chargeback management at their disposal.
Another pivotal technology used at the post-processing stage is payment analytics. Businesses can analyze various parameters, including payment routes that proved to be the most efficient for processing transactions, channels with the highest fraud risk, the most financially advantageous payment paths, and more. By leveraging insights gained from such analyses, merchants can refine the processing stage, making it more convenient for customers to make a purchase. Thus, although at the post-processing stage, it will not be possible to directly influence completed transactions, the data derived from them can be instrumental in fine-tuning future transactions for optimal performance.
Paying the price for ignoring payment processing optimization
Merchants who overlook payment processing optimization expose themselves to a multitude of potential issues that can significantly impact their bottom line. Consider the scenario where a customer is ready to make a purchase, but when they reach the payment page, they find it lacking their preferred payment options. Disappointed and frustrated, they abandon their cart, leaving the merchant with a lost sale. Yet, if the customer still gets to the processing itself, the journey doesn’t get any easier. Here, if customers encounter issues with their payment processing with no clear guidance on how to resolve them, they are likely to abandon their purchase mid-process.
On the merchant’s side, another problem that may arise is their inability to establish an efficient transaction route, sending a potentially successful transaction to the wrong payment provider. An inefficient payment route can lead to false declines, delay access to funds, or negatively impact profits through high interchange fees. The most critical oversight, however, lies in neglecting chargeback management. Without diligent attention to this aspect, merchants risk not only financial penalties but also the closure of their merchant accounts, the freezing of assets, and, ultimately, the loss of the business itself.
The consequences of overlooking payment processing range from less severe to fatal. However, with effective payment management, these issues can be easily avoided.
Transforming payments into lasting connections
Navigating the complexities of online payments is all about diving into the heart of what makes a customer's payment journey truly successful. Ultimately, optimized payment processing stages are not just about completing transactions — it's about getting to know the customer. As merchants continue to fine-tune their approach to payments, they not only boost their immediate profits, but also lay the groundwork for a future where every transaction is an opportunity to connect, understand, and grow. Such a customer-centered approach challenges businesses to ask themselves: are we merely facilitating payment processing, or are we crafting experiences that resonate, engage, and endure?
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