A smooth and well-balanced payment process is vital for every business. That’s why it requires continuous optimisation as the business processes and customer needs evolve with time. There are numerous strategies that improve the performance of payment processing methods. Which one would you choose?
What Payment Optimisation Is
Businesses constantly change different segments of their operations that stop being effective enough. That’s what we call optimisation. When it comes to payments, they are an integral part of every business that sells its services and products. If they are inefficient, the whole e-commerce process stalls, customers become unhappy, and more carts are abandoned.
Payment optimisation is an improvement of the existing payment process that boosts its performance, speed and convenience. It reduces checkout friction and transaction fees, improves conversion rates and customer experience, and mitigates fraud risks.
With the right payment optimisation strategy, a business can achieve cost-efficiency, avoid unnecessary chargebacks, boost their market reach and conversion, speed up fund availability and improve liquidity, promote brand loyalty, minimise fraudulent transactions, gain insights into customer payment behaviours to refine business strategies, and get many more benefits.
Top Signs That You Need to Optimise Your Payment System
You might consider employing some optimisation strategies if you notice some of the following red flags:
High Cart Abandonment Rate
About 70% of online shopping carts are abandoned by customers without making a purchase. That can happen for many reasons. Not all of them are actually the seller’s fault. However, if your cart abandonment rate is higher than the average 60%–80%, take a closer look at the checkout and payment processes.
If the cart abandonment is between 70%-80%, review what might be going wrong and check whether most customers leave the checkout incomplete at the payment stage. If the rates are over 80%, payment optimisation is almost inevitable.
Please, note that different industries and service/product segments might have slightly different cart abandonment norms. For instance, the rates for grocery and essentials are typically lower than average, about 50%–60%. Make sure to compare your cart data to the specific industry benchmarks if they differ from common standards.
Additionally, cart abandonment rates might differ for different sales channels. For example, mobile abandonment is typically 5–15% higher than desktop. Take such details into account while tracking the conversions.
Excessive Payment Declines
When too many payment transactions are declined, even for valid purchases, it can hurt your business revenue. Typically, the decline rate of about 5%-10% is considered normal. There might be solid explanations for this: attempted fraud, insufficient funds, expired cards that are automatically linked to the user account, etc. However, if your total decline rate exceeds 15%, it signals a serious issue that needs optimisation.
Some of the reasons why your payment processing system declines too many transactions are hidden in overzealous fraud protection means. Your prospective revenues might fall victim to outdated fraud filters, inefficient payment routing, static prevention algorithms and rules that don’t account for user-specific behaviours or changing contexts, systems that heavily rely on velocity checks, etc.
Frequent Chargebacks and Fraud
At the other end of the scale, your fraud prevention strategies might be ineffective if you face too many chargebacks and fraud complaints. That happens when the system does not properly distinguish between fraudulent and legitimate transactions. A recent research revealed that 83% of customers won’t return to a retailer that failed to protect its customers from fraud.
Chargebacks are considered excessive when they exceed 1% of total transactions. This is the threshold most payment processors and card networks use to determine risk, so you could consider similar criteria while looking for payment optimisation signs.
Unsatisfactory Payment Processing Conditions
If a business owner, employees, partners or customers are not satisfied with some aspects of the payment processing system, it is also an important sign that it needs optimisation. For example, you may be paying excessive transaction fees, your vendors and partners experience delays in receiving their payments, you often face compliance or security issues, your payment system can’t handle increased transaction volumes by scaling operations, or customers complain about payment failures and lengthy checkout times. All these factors contribute to the lost business potential and require fixing. That can be altered with proper optimisation strategies.
Payment Optimisation Strategies to Improve Your Payment Flow
There are different payment optimisation methods. Some of them are better and others are less suited to a particular case. Thus, established market leaders with high transaction volumes need completely different strategies than emerging businesses which are preparing to accelerate their growth. Let’s see what options you have when it comes to optimising an inefficient payment system.
Reducing Operational Costs
This strategy applies to many situations. Whether you leverage services of a few separate payment providers and various applications which cause the aggregate processing cost to go too high, or look for ways to release some funds for other purposes, reducing operational costs might be your go-to alternative.
At the same time, it is important not to lose service quality in a rush to make payment processing less costly. Therefore, merchants must select payment vendors and processors that offer cost-efficient solutions. Besides, reducing payment processing costs must occur without compromising transaction success rates.
As part of this strategy, businesses can negotiate better rates with payment processors, use a multi-acquirer setup or intelligent routing to automatically direct transactions through specific gateways based on cost, success rates, or geographic efficiency, switch to a flat-rate or interchange-plus model, automate some areas throughout the payment process, etc. Besides, processing transactions in batches at optimal times can lower fees. You can negotiate with your processor to find out if it’s possible to schedule transactions at low-fee times (avoiding peak congestion).
Expanding Payment Options
Lack of available payment methods may significantly lower your conversion rate. Customers rarely sign up for a new mobile wallet or payment service exclusively to make a purchase. Moreover, about 60% of e-commerce shoppers will abandon their carts if they don’t see their preferred payment method among the payment choices. Thus, offering them a customary mode of payment is the merchant’s job. Variety is especially important when you cater to an international audience. However, your checkout should not be overwhelming with all the icons and options popping up, so it’s better to localise the payment page for each region.
Merchants who provide a variety of payment options — not random ones but exactly those preferred by their target customers — can boost conversion rates by as much as 30%. Besides, adding flexible payment options like Buy Now, Pay Later (BNPL) can help businesses attract customers who might otherwise find purchases unaffordable. BNPL is especially popular among Gen Z and Millennials. However, nearly 60% of consumers across all generations prefer BNPL over credit cards due to its ease of use, simple approval process, and lack of interest charges.
While expanding your payment method variety, make sure to offer the right mix. Prioritise lower-cost and flexible options for customers. Analyse current payment trends and local payment preferences leveraging up-to-date transaction insights and survey data. Ensure that you offer at least the top three payment methods in a given market. Do not go over the top with adding all the variants possible. Remember that managing too many payment options can increase the administrative burden for the company, complicate accounting processes, and lead to higher installment and maintenance costs.
Enhancing Transaction Approval
Many declined payments could be approved on retry, especially if you use intelligent retry systems to automatically reattempt failed transactions at different times. Optimised payment processing tools offer a comprehensive breakdown and actionable insights on Strong Customer Authentication Exemptions, order level authorisation rates, 3DS transaction outcomes, platform-specific authentication failures and transaction decline reasons, and other valuable data.
To boost payment authorisation, you may also consider collaboration with payment processors that support real-time account updates (e.g., for expired cards). Real-time account updates help avoid many declines by automatically retrieving the latest card information from major issuers before the transaction is processed. It is especially useful for subscription-based services and other recurring transactions, where payment details are stored for a long time and money is debited automatically. In fact, merchants may recover up to 30% of previously lost revenue caused by expired cards, account changes, or lost and stolen cards by implementing this solution.
When you expand your services abroad, make sure to cooperate with local acquiring banks in key markets to reduce foreign transaction fees. Consider offering your foreign customers currency conversion options so that they can pay in their local currency, which may reduce red flags for international purchases and increase the approval likelihood. Besides, when customers see prices in an unfamiliar currency, they do not know the exact conversion rate and may not properly estimate the amount to pay. That leads to either unexpected charges which customers may want to retrieve or insufficient fund declines. Providing a clear, local-currency price ensures they have sufficient funds to complete the transaction and know exactly what to expect.
Boosting Security and Compliance
When your payment processing suffers from compliance or security issues, consider implementing a few key improvements. To begin with, you might want to integrate network tokenisation into your payment system if you hadn’t already done so. Network tokens help businesses improve security, reduce payment declines, and enhance customer retention while maintaining seamless transactions. They are a safer and more efficient alternative to traditional card-on-file payments as they do not include sensitive card details. Besides, if a customer’s card expires, is lost or reissued, the network token is automatically updated without customer intervention.
To maximise payment success rates and minimise costs, businesses should also partner with a payment provider that utilises AI-driven transaction routing. This technology intelligently selects the most efficient path for each payment, taking into account the unique regulatory requirements, banking infrastructure, and risk factors in each market. Additionally, working with a provider that offers local acquiring solutions is essential for optimising cross-border transactions. Local acquiring helps businesses ensure compliance with country-specific payment regulations, preventing unnecessary declines or delays.
To Conclude
Optimising payment processes leads to cost-efficiency, higher approval rates, improved customer satisfaction, and greater business growth. Businesses should continuously refine their payment strategies to stay competitive and maximise revenue. To choose the right one, analyse your core payment issues and business essentials. The optimisation solution that best fits your unique needs and goals will help you significantly boost conversion and profits.
