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Today, businesses across all industries are constantly on the hunt, aiming to boost sales and increase revenue. Within this never-ending process of developing innovative customer journey strategies lies an often overlooked yet crucial phase: payment processing. This critical stage in the sales cycle is often neglected, overshadowing its significant potential to influence a customer’s purchase decision. The truth is, though, that just because a customer proceeds to the checkout page doesn’t mean they intend to complete the purchase. It’s at the checkout stage that the final decision is made.
According to the 2024 Cart Abandonment Rate Statistics released by Baymard Institute, the average documented online cart abandonment rate is 70.19%. The data shows that only one in three shoppers who make it to checkout actually follow through with their purchase. Furthermore, one in five shoppers abandoned a cart last quarter due to a long and complicated checkout process. The loss of profit this causes for businesses every day is staggering.
Now think of the potential revenue uplift that businesses can achieve by channeling their resources into improving top-line payments. But how? The answer lies in optimizing payment processing.
The Anatomy of Payment Processing: Three Critical Stages
When it comes to optimizing payment gateways, there are three crucial stages: pre-processing, processing, and post-processing. Each of these stages must be handled properly to avoid losing customers, as there are potential pitfalls at every step of the process.
1. Pre-processing begins when the customer lands on the checkout page. Here they make a final decision on whether or not to proceed with the payment, influenced by what they see.
2. Processing is self-explanatory. This stage begins when the customer submits their payment information and ends once the information is verified and the transaction is complete. This step needs to be smooth and fast, as delays or errors can cause frustration and lead to cart abandonment.
3. Post-processing: After the payment has been processed, this stage includes everything that follows. It also provides an opportunity to analyze the transaction and use this information to refine payment processing in the future.
Optimizing the Customer Payment Journey: Strategies and Tips
Optimizing the payment journey at every stage requires unique strategies. Let’s discover them step by step.
Step 1: Simplify pre-processing
By the time a customer reaches the checkout, their digital footprint has already been mapped. 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 create a checkout experience that’s tailored to the customer’s needs. The result? A checkout page that only presents the payment options customers expect to see, making their purchasing experience as easy as possible.
Minimizing the interactions required to make a payment is another strategy to implement. While just a decade ago, customers would enter their full payment details to complete a purchase, the scenario has changed rapidly. According to the research, 22% of potential customers abandon their shopping carts due to long and complex checkout processes. For businesses that want to retain customers, simplifying the checkout process is not only beneficial but essential. This can be achieved with 3DS 2.0’s streamlined security and network tokens. It is also important not to ignore mobile payment methods such as Apple and Google Pay, given their increasing prevalence across the globe.
An additional point to keep in mind is that the navigation on the payment page should be intuitive, simple and clear. While smooth transactions are the goal, it is also worth anticipating a situation where problems arise during credit card processing. In this case, customers should be able to find their way back to the payment page with one click. Clarity in navigation ensures that users are not left in the dark about their money and the progress of the transaction, reducing the chance of abandoning the shopping cart due to confusion or frustration.
Step 2: Optimizing the processing
With refined payment methods and improved payment page usability, the focus shifts to the processing stage itself. This is where businesses have the opportunity to customize the payment flow, striking a delicate balance between meeting customer expectations and serving their own needs.
By leveraging insights about the user and their chosen payment method at checkout, businesses can use payment routing technology to route transactions along the most efficient path. This way, when a customer enters their payment details and makes a payment, the transaction goes to the most appropriate payment provider. Routing criteria include a range of parameters such as transaction fees, speed of money transfer to merchants, exchange rates, and others. Additionally, routing parameters can be static, predefined prior to payment processing, or calculated, dynamically adjusting as circumstances change.
However, some transactions are still declined by payment providers. While these failed payments may seem like a lost cause at first, many of them can be successfully processed, saving the company both revenue and customer loyalty. To achieve this, a cascading mechanism comes into play. This technology is designed to seamlessly reroute a transaction declined by one provider to another within a single payment attempt, ensuring an uninterrupted payment flow, increasing transaction approvals by up to 30%.
Tackling payment fraud is another key challenge that businesses can address during the processing stage. To do so, they need to implement additional security measures, such as anti-fraud filters and user authentication measures such as Know Your Customer (KYC) and Know Your Business (KYB), tailored to the specific needs of their industry and the location of their customers.
The most effective way to deal with payment fraud is to use simple rules. For example, limit the customer to making more than a certain number of transactions with 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 to provide comprehensive fraud protection. Businesses can also use specialized anti-fraud services offered by third-party companies with expertise in different business domains and geographies, and take advantage of huge 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 seems like the hard work is over. However, the post-processing phase is just as crucial. At this point, customers can request a refund. Businesses need to handle these requests quickly to avoid escalating into chargebacks, which would bring banks directly into the fray and leave merchants out of the picture entirely.
The amount of refunds and chargebacks is regulated by payment systems. If this percentage exceeds acceptable limits, merchants may face significant risks, including possible termination of agreements with payment partners and freezing of funds. Therefore, it is better to minimize chargebacks and refunds. For this to happen, merchants must be able to receive information about a possible chargeback in a timely manner. After this, it is crucial for a company to decide on the right course of action: whether to accept or dispute the chargeback, and ensure that they have the necessary tools for effective chargeback management at their disposal.
Another crucial technology used in the post-processing phase is payment analytics. Businesses can analyze various parameters, including payment routes that have proven to be the most efficient for processing transactions, channels with the highest risk of fraud, the most financially advantageous payment paths, and more. By leveraging insights from such analytics, merchants can refine the processing phase, making it easier for customers to make a purchase. Thus, while it will not be possible to directly influence completed transactions in the post-processing phase, the data derived from it can be instrumental in refining 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 get to the checkout page, they see that it doesn’t have the payment options they want. Disappointed and frustrated, they abandon their cart, leaving the merchant with a lost sale. But when the customer does get to the processing itself, the journey doesn’t get any easier. If customers encounter issues with their payment processing here without clear guidance on how to resolve them, they’re likely to abandon their purchase mid-process.
On the merchant’s side, another problem can arise: their inability to set up an efficient transaction route, which results in a potentially successful transaction being sent to the wrong payment provider. An inefficient payment route can lead to false declines, delayed access to funds, or a negative impact on profits due to high interchange fees. However, the most critical oversight lies in the neglect of chargeback management. Without careful attention to this aspect, traders risk not only financial penalties, but also the closure of their trading accounts, freezing of assets, and ultimately the loss of the business itself.
The consequences of ignoring payment processing range from minor to fatal. However, with effective payment management, these problems can easily be avoided.
Converting payments into sustainable connections
Navigating the complexity of online payments is about getting to the heart of what truly makes a customer’s payment journey successful. Ultimately, optimized payment processing stages aren’t just about completing transactions; they’re about getting to know the customer. As merchants continue to refine their approach to payments, they’re not only increasing their immediate profits, they’re laying the foundation for a future where every transaction is an opportunity to connect, understand, and grow. This customer-centric approach challenges businesses to ask themselves: are we simply facilitating payment processing, or are we creating experiences that resonate, engage, and stick?
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