An optimized payment process streamlines your business operations. Not only can you cut costs and save time with a high-level system, but you retain a larger revenue share that can lead to better profitability and extended business growth.
While the benefits of a simple payment process might seem obvious, implementation can present a challenge. Preventing fraud, working with third-party processors, and creating a seamless customer experience are complex tasks that require a certain level of know-how.
Luckily, you don’t need to become a bonafide expert to make payments easier for your clients. To help you improve your merchant operational efficiency and reduce business costs, use the following best practices and apply them to your payment processing.
Table of Contents
- Best Practice #1: Take Advantage of High Quality Payment Vendors
- Best Practice #2: Monitor and Improve Payment Declines
- Best Practice #3: Share Data on Secure Networks
- Best Practice #4: Personalize Your Payment Process
- Best Practice #5: Reduce Checkout Friction
- Best Practice #6: Support Customer-Desired Payment Methods
- Best Practice #7: Maintain Payment Integrity
- Best Practice #8: Use Fraud Detection Services
- Best Practice #9: Limit Instances of Friendly Fraud
- Best Practice #10: Deter Policy Abuse
Best Practice #1: Take Advantage of High Quality Payment Vendors
Payment vendors facilitate the actual payments between your business and any customers, so the quality of your third-party provider can have a sizable impact on your business efficiency. In particular, a good vendor will offer you better authorization rates, matched with strong fraud prevention solutions and system security. Considering that accepted transactions through online payment methods can be 10% lower than in-person, any eCommerce merchant can gain immediate benefits by leveraging an effective processing partner.
Improved acceptance rates from attempted customer payments will increase sales volumes, as more orders from legitimate sales result in completed buy orders. Most high-quality vendors achieve such improvement by limiting declined transactions so you can retain priority customers for longer lifetime sales values. Plus, the sophisticated technology associated with top-notch payment vendors can better manage false positives, a problem associated with digital applications that refuse risky orders (even if they come from honest clients).
If you want to make an easy and hassle-free step into a safer payment environment, integrate a good third-party payment processing service.
Best Practice #2: Monitor and Improve Payment Declines
While a payment vendor will offer immediate help in reducing payment declines, you can also take several steps to clean up bottlenecks in your own business operations that further contribute to customer payment issues. Since Visa and Mastercard report nearly 15% of all transactions come back in error (and some business verticals reach a rate as high as 25%), limiting card declines can directly improve revenues.
Most transaction declines occur because of credit information errors or problems with verification. Invalid CVV numbers, expired cards, incorrect card numbers, and insufficient fund messages all force a sale to remain incomplete. To help limit such customer friction and lower system costs from rejected orders, collect accurate billing information. Customer outreach requesting account changes can also function as a proactive step. Plenty of automatic account management programs can also locate or flag customer orders that appear incomplete.
In specific instances, you can try resubmitting a declined payment to maintain a positive customer relationship. For example, if an integrated application automatically declines an order due to an insufficient funds error, having customer service address the client directly (reentering data, using a second card) can maintain positive client communication without losing the sale.
Best Practice #3: Share Data on Secure Networks
To authenticate and initiate a payment, a host of customer financial data transfers between the issuing bank, your merchant account, and a payment processor. Sharing data is necessary, but it also exposes you to threats from unauthorized users who can access the network.
Beyond the fact that customer data protection is a merchant’s responsibility, bad network security can result in system crashes, data breaches, and prevent identity theft. Downtimes of business-critical operations are costly, and a bad reputation for lax internal controls for data can deter customers. Considering 81% of consumers state they would stop engaging with a brand after a data breach, sharing data securely takes on greater importance for merchants who rely on consumer retention for profitability.
To shore up your data sharing protections, use vendor networks for card authentications, along with 3-D Secure. Prioritize using top-tier services that offer extended security protections. If possible, supply only the most pertinent data information to minimize exposure risk, and restrict access to sensitive files on a need-to-know basis.
If you need expert help on such security matters, there are many services that can provide you with digital protection solutions.
Best Practice #4: Personalize Your Payment Process
Recent studies show that 71% of customers now expect tailored interactions with a business of their choice, with another 76% expressing frustration when such personalization does not occur. It pays to employ a customer-centric approach—businesses that can personalize according to consumer desire are 60% more profitable.
There are numerous ways that you can develop more customer-focus within your payment process:
- Create simple shopping cart and checkout pages
- Build mobile-friendly webpage versions for fast customer payments
- Develop customer profiles and provide tailored add-ons and sales messaging
- Leverage social media for rapid purchases, and take advantage of specific remarketing possibilities through reviews and user-generated content
- Streamline payments with location information (automatic address fill in and tax information)
- Make payments as much of a self-service endeavor as possible, but have customer service reps or chatbots ready for questions or concerns.
In today’s highly competitive market, customer retention can lower expenses. It involves five times as many resources to attract a new client compared to keeping an existing one. Personalization will result in a better customer experience and help maintain positive, low-cost sales relationships.
Best Practice #5: Reduce Checkout Friction
The checkout is the final step in the buyer’s journey, and reducing friction in that all-important step can be the difference between a sales conversion or a bounced customer. Finding ways to limit cart abandonment will boost revenues and lead to better value capture for all your customer acquisition costs.
Recent data shows the crucial importance of addressing customer friction at the checkout stage. The average cart abandonment rate across all industries rests at a whopping 69.57% (a number derived from 41 combined studies). Other reports suggest that the eCommerce market leaves $18 billion of sales revenue on the table each year because of cart abandonment. Solving customer friction within your payment process is necessary for anyone who wants to improve their business operations.
Short of a complete overhaul of your online payment pages, there are several action steps you can take to limit any friction within your sales funnel.
- Develop an online footprint with high-level UX
- Use clear fonts and proper grammar
- If possible, reduce your payment gateway to a single page with limited entry fields
- Take advantage of auto-fill functions
Best Practice #6: Support Customer-Desired Payment Methods
Ecommerce and the payments industry are increasingly shifting into rapid transaction methods such as digital wallets, smartphones, or card-not-present options (the total transaction value in digital payments is expected to hit over $8 trillion in 2022). Digital payments offer immense user convenience, and meeting consumer demand can create a far more seamless payment experience. Plus, adopting a wide variety of payment acceptance methods will capture a larger market share as it will attract consumers and enterprises who wish to pay via alternative monetary forms.
Beyond simple convenience, new payment methods offer other benefits to both you and consumers, such as security and faster processing. Credit cards traditionally take 48 hours to settle from the issuing bank, but Apple Pay has an Instant Transfer function that will post immediately with an additional 30 minutes for account security checks. Such speed makes accounting far easier, and having new payment methods drives down fee prices in other payment domains.
While the initial setup may include some overhead expenses, different payment methods attract customers and can offer cost reduction benefits.
Best Practice #7: Maintain Payment Integrity
The entire payment industry is built on trust. Businesses can leverage that trust to create fruitful sales interactions, which is why maintaining a positive business reputation remains a critical focus for most merchants. The issue compounds with the prevalence of online reviews and search engine optimization, as 75% of consumers trust a company more if it has good reviews, and 65% of users trust online searches when researching a business.
Within your payment processing, transparency is a crucial element that can help build consumer trust. Remaining clear about your business practices, sales tactics, and data sharing all result in extended customer confidence. For example, listing product availability and giving accurate descriptions can reduce wait times and chargebacks. Your pricing and promotional offers should be easy to read and apply with ease when added to a shopping cart. Declare shipping and handling costs before final purchase so that it does not discourage clients and lead to abandoned carts.
The more transparency you provide, the more streamlined your sales funnel will operate.
Best Practice #8: Use Fraud Detection Services
Fraud introduces immense profit losses to all merchants. Every $1 of fraud now costs eCommerce retailers $3.60, and the overall value of payment fraud in 2021 reached about $20 billion. Preventing bad actors from enacting their malicious schemes is crucial for merchants who want to limit undue expenses.
The impact of fraud extends into many business operations. It can show up in stolen goods or services, data breaches into company servers, or unexpected chargebacks. Fraud also erodes consumer satisfaction and introduces immense strain to the customer/business relationship. The financial stability of any merchant system can fall apart by malware, skimmers, and falsified gift cards. Each form of fraud requires more investment in customer service reps, cybersecurity, and chargeback mitigation.
To limit such costs, leverage a fraud detection service. The service will utilize technology to assess orders, limit instances of fraud, and build customer risk profiles to defend against suspicious activity. Many detection services will even offer zero-liability policies, helping lower the financial harm of fraudulent activity. Most importantly, the detection service works behind the scenes with minimal friction within your sales funnel (an issue with many standard security services).
Best Practice #9: Limit Instances of Friendly Fraud
While a fraud detection application can prevent true fraud, it cannot always catch instances of friendly fraud. Friendly fraud often occurs from honest, high-value clients because of mistakes, errors, or bad judgment—aggressive prevention solutions cannot locate or understand such nuance. For example, consumers might request a chargeback because they do not recognize your store’s billing descriptor on their monthly credit card statement, leading to a wrongful chargeback that no fraud solution will detect. Other chargebacks occur because of missed or undelivered packages, buyer’s remorse, or forgetfulness. In all cases, you lose the product value in addition to the chargeback fees and any revenue losses.
The intent of such fraud is not easy to evaluate and defend against. Moreover, any aggressive actions to limit such friendly fraud can fracture what once was a positive business relationship. While it is a challenge, finding ways to stop friendly fraud can eliminate the $125 billion per year merchants lose to chargeback fraud.
Common friendly fraud prevention tactics include:
- Writing clear terms and conditions for all sales
- Granting refunds
- Reducing system and shipping errors
- Improving customer service
- Utilizing chargeback mitigation services
Best Practice #10: Deter Policy Abuse
In addition to friendly fraud, you can improve your payment system and cut costs by preventing instances of promo abuse. U.S. Retailers lose as much as $89 billion per year in revenue as both consumers and fraudsters take advantage of promotional offers for personal gain. Refund abuse leads to another $25 billion in losses for merchants. Finding ways to shore up and implement strong store policies can keep more profits within your business economy.
Unfortunately, many instances of promo and refund abuse are carried out by your average (and even highly loyal) consumer. From simple actions like reusing referral codes to editing receipt numbers to earn higher refunds on returned items, it is quite easy for the consumer to take advantage of your goodwill. While small in scope, such expenses add up and lead to sizable losses. Moreover, it introduces an extensive amount of additional labor, as your payment system must now handle the complexity involved with falsified refunds, loyalty rewards, gift cards, and discounts—at scale.
To deter promo and refund abuse, create visible, easy-to-read store policies. If possible, leverage technical solutions and data insights to help detect risky customers and reject refunds that are likely to result in fraud. If possible, reevaluate any free-shipping policies and create detailed product descriptions for all sales.