Optimizing payments is essential for growth. Spurred on by the rapid advancement of technology, consumer preferences and expectations from merchants have evolved at a seemingly breakneck pace.
Consumers, especially tech-savvy Millennials and Generation Z, live in a largely digital world. They expect their entire shopping experience and checkout process to be simple, frictionless, and relevant to their personal needs. This means they expect to be able to make a purchase and pay for it using any device or channel, whenever, and however they want.
As the world becomes more focused on digital technology, a simple payment experience has become an increasingly important success factor for merchants. It is one of the key elements that can directly impact conversion rates.
For example, consumers often abandon their purchases if the payment process is too long winded or their preferred payment methods are not available. Merchants need to have a robust payment strategy in place and be quick to use new payment technology to stay ahead of competitors.
Today, with the emergence of new payment instruments, and payment methods, consumers have no shortage of options. Merchants need to understand what this means to their business and how they can optimize their approach to payments, both to control costs and to drive incremental sales.
So how do you optimize online payments to increase overall merchant profitability? Here are five ways to boost your ecommerce revenue, according to payments experts Edgar, Dunn & Co.
Optimizing payments for mobile
With the significant growth in mobile commerce, optimizing payment page design is critical. In fact, our research suggests that consumers are more comfortable spending higher amounts on larger devices.
This means merchants should offer a dedicated interface for each type of device, so that consumers don’t struggle to see, for example, the whole range of payment options on a smartphone.
Credit cards aren’t the only way to pay
Outside of North America, credit cards like Visa, Mastercard and Amex are not the most prevalent payment methods. For example: according to Adyen data, in China only 1% of shoppers pay with international credit cards; and in Germany less than 25% of shoppers use credit cards for online purchases.
Considering this, it is increasingly important for merchants to offer more ways to pay, especially if they want to appeal to a global market.
In the chart below, you can see which local payment methods account for the highest percentage of transactions in each country.
Go local with acquiring
A few of the many benefits of a local, country-specific acquiring approach: higher card authorization rates, lower scheme and interchange fees, and faster merchant settlement.
Most global merchants will end up with some combination of local and international (or cross-border) acquiring, but adopting local acquiring approach nearly always has a positive impact on authorization rates.
Though this varies by market, a merchant will typically see as much as 0.5-0.6% in uplift after transitioning from cross-border to local acquiring.
Increase conversions, reduce acceptance costs
Payment data is a valuable tool to increase revenue and reduce costs, and merchants should use the analytics and insights drawn from it to their advantage.
On average, 5-15% of ecommerce credit card transactions are declined by issuing banks, and of those declines, 25% lack valid reasons, usually due to old and inefficient systems.
But a good payment partner can reduce the number of declines by optimizing the data submitted, suggesting corrective changes to the issuer, or identifying a better routing for a given transaction.
Use data to battle fraud, maximize profit
The growth of ecommerce also comes with the threat of fraud. To minimize fraud losses, online merchants are working with various forms of risk management to block fraudulent transactions.
But many of these systems, especially the more conservative ones, are also blocking genuine transactions. This prevents legitimate shoppers from checking out and yields a net loss in revenue (the so-called “false positive” problem).
Risk management is both a science and an art, and it is important for merchants to find the right balance between security and conversion.
By following the best practices of companies like Amazon and Uber, ultimately payments should be ultra-convenient and intuitive.
