5 ways to improve payment efficiency

Consider a lightbulb. Although it lights up the room, some energy is wasted heating up the air around it. We know from Isaac Newton that energy is never truly lost, it is simply transferred. That’s the reason we avoid using inefficient light bulbs – there’s no sense paying higher electricity bills for a suboptimal result.

Consider your payment processing the same way. Funds are not truly lost – they may simply transfer to your competitor, instead. If your payment gateway wrongly declines your customer’s payment, that customer will leave and never return 42% of the time. 

If you can make efficiency gains within your business, you can retain more of the revenue coming from your customers.

This guide will consider five major efficiency drags on your payment processing profitability – and how to solve them.

Problem #1: Guessing at ways to increase acceptance rates 

If you can improve your acceptance rate (AR), you’ll bring in more revenue for your business. Losing a customer at the payment stage is the greatest inefficiency of all: your technology lets you down, and the sale falls through. One of your main tasks as payments lead is to figure out how to convert those payment requests into funds acquired.

And experimentation is often the best way to test new ideas. But you can get further, faster if you make use of existing data. That’s why you should ask your PSP what data analysis insights they can provide to optimize your payments; you’ll only ever see the transactions through your own business, but the PSP will see all the transactions of all their clients.

When you’re looking for ways to boost authorization rates, reduce false declines, and improve fraud filtering, it’s worth turning to machine learning. As you move away from designing a payments strategy in the darkness of the “black box” described above, you need to make data-driven decisions.

Solution: Machine learning improvements to your traffic

Since payments are digital, your payment solutions should be, too. We can’t work out the probability of thousands of transactions succeeding each second, but our machines can. And our Data Dashboard allows you to review the acceptance rate uplift from enabling certain optimizations. 

When merchants share more of their payment session data with us, a number of improvements can occur. Not only do authorization rates increase, but there can be an increase in no-challenge payment experiences as 3DS authentication is needed less often. For example, a gaming merchant also saw over 1.7% AR uplift as a result of sharing customer details with us (such as name, phone number, and email address). The merchant also saw a 12% increase in customer payments that did not need SCA. 

That goes to show how careful data sharing can lead to more efficient payments, lower processing costs, better customer experiences, and, ultimately, more revenue.

Problem #2: Poorly connected payment systems 

When you’re managing the payments of a complex business, you are likely dealing with a patchwork of legacy systems from various vendors. Indeed 70% of merchants told us their payments tech stacks are disjointed. 

This can pose issues with data fluency: not all of the information carries over from one system to the next. For example, your payment gateway may not integrate effectively with your enterprise resource planning (ERP) software. That can leave holes in your costing spreadsheets, leading to blindspots in cost efficiency.

Indeed, payment service providers (PSPs) can develop in exactly the same way – certain PSPs have evolved unevenly, gluing products together acquired from different companies over time. Parts of the payment process may be outsourced to third-party suppliers, meaning even less data is available for analysis. 

Our first-hand research shows how costly this “black box” of payment data is for merchants. We know, for instance, 67% of merchants do not receive fraud and chargeback analysis data. Given merchants are charged for every single chargeback – and may be liable for fraudulent payments, depending on their particular circumstances – visibility over such data is absolutely vital.

Solution: Payment provider which owns each stage of the transaction cycle

A modular payments tech stack can help you keep control over the entire payment flow. However, you can face headaches when different pieces of the puzzle have a staggered adoption to new standards and regulations. What if your payment gateway isn’t set up to support a new scheme mandate, but your authentication product is? 

If you choose a PSP that’s built products in every category, you can make efficiency savings. For instance, Checkout.com’s authentication and fraud monitoring engine ensured our merchants saw minimal negative impact when SCA became mandatory in the EU in 2020.

You could also use the same PSP to build a card issuing program, and fund the cards with revenue from the acquiring side. This is useful for efficient liquidity management, saving time and costs compared with manual transfers between financial systems.

Antoine Maillard, co-founder and CTO of Jow explains the benefits of “having a single partner to rule everything” in our virtual card program case study.

Solution: Payment data visualized on a centralized platform

When you need to check on your payments, you should be able to do so from one place. The Checkout.com platform includes a Data Dashboard and Unified API, ensuring you can easily access payments data for the particular region, time period, and entity you need. 

As an end-to-end processor-acquirer, Checkout.com can provide you with data from all stages of the transaction life cycle. That allows us to provide accurate information on authorization rates, captured amounts, authentication, decline rates and reasons, financial actions, and more.

The Checkout.com Data Dashboard can also help you monitor disputes that arise. That means you’ll know what actions to take to address each dispute, help to reduce your chargeback ratio, and avoid costly scheme penalties. It’s useful to have all that information all in one view, rather than trying to track payment disputes from individual issuers.

Problem #3: Recurring customer payments are dropping off 

If your business takes recurring payments for subscriptions, this section is for you. Two major inefficiencies arise from expired customer payment details and false declines from incorrect merchant-initiated transaction (MIT) requests.

We know that payment errors are the greatest pain point in online acceptance for 30% of merchants – and rightly so, as these errors can lead to false declines and “lost” revenue. 

In the event of a false decline, many merchants set their systems to automatically retry the payment. If it fails again? Automatic retry. And again? Automatic retry. Unfortunately, this approach can lead to large fines from schemes and potential blacklisting by issuers.

Instead, it’s better to craft a careful strategy that may involve scheduled retries set at custom time intervals. Depending on your business model, you could also consider partial authorization to capture a lower fund amount and avoid total cart abandonment. 

Let’s look at two more methods to remedy failed recurring payments.

Solution: Automatically update payment details

Expired card details will stop recurring payments in their tracks, causing frustration for both your customer and your head of finance. That’s why we advocate for a strong payment continuity strategy. 

Our Real-Time Account Updater makes use of the Visa Account Updater and Mastercard Automatic Billing Updater to ensure payments continue even if the customer’s card is lost, stolen, or expired.

On top of this, consider using multi-use tokens as a fail-safe against expired card details. You will need to consider whether your business has the capacity to generate and store its own tokens, or if it makes more sense to use third-party token management services.

Solution: Correctly format your payload for merchant-initiated transactions

On a technological level, you need to iron out any errors in your payload. Our payments API supports MIT indicators, which can increase the likelihood that issuers will accept the MIT request. You could choose to indicate the reason for your MIT request to help improve your acceptance rate.

Yet, one of the most common mistakes we see with MITs is not correctly including the previous payment ID.

Our docs explain how to store card details for recurring payments during the initial transaction. However, your future transaction requests must include the initial transaction ID formatted in the correct way. If you receive an error code “mit_with_incorrect_psid_format” that means there’s a potential bug in the mechanism for recalling the previous transaction ID. Your engineers will need to take another look at your MIT payload structure.

Problem #4: Manually integrating new payment methods

As you scale locally and internationally, you want to present your customers with their favorite local payment methods. This is vital for conversion, particularly as you seek to build your brand’s presence in a competitive global marketplace. Indeed, “increasing acceptance of alternative payment methods” came up most often (48%) when merchants were asked to name important payment initiatives in their organization.

Yet, introducing a new payment method can take weeks of engineering work. This is not a scalable strategy for an ambitious business. It’s an inefficient use of engineers’ time, and no longer the best approach in the competitive age of digital commerce.

Solution: A flexible integration that quickly accommodates new payment methods 

When you don’t have weeks to waste, it’s important to locate a solution which allows for speedy and secure integration of new payment methods.

Technology such as Flow consists of one integration that makes payment methods available when you need them. This greatly improves your payment efficiency, because you can offer multiple payment methods to your customers as soon as your new app or website is live. 

You can even offer customers a selection of payment methods based on their geographic location, and in their local language.

Problem #5: Needing multiple payments partners for different global regions

It’s important for efficiency that you have as few external vendors as possible. Why would you hire five consultants if you could achieve the same results with just one? It means extra conversations, extra integrations, and extra invoices to pay. Bear this in mind as you seek to scale into multiple global markets.

Solution: Choose a PSP with a multinational presence

Working with a payment processing partner with global reach is “highly important” for the majority (55%) of payments leaders at larger companies. This stands to reason given the significant investment of resources it takes to onboard a new PSP. You should consider your business’s future plans to expand overseas, and look for a payments partner that can support your expansion in the specific regions you’re targeting.

Take a look at our guide to international business payments to learn more about designing your global payments strategy. As a fully licensed and compliant global payments partner, Checkout.com offers local acquiring, supports local payment method integration, and handles competitive currency exchange in many locations around the world.

Summary: Maximizing efficiency in your business payments

Adjusting your payment strategy is no simple task. But a mindset of efficiency can be a clear guiding principle. Here’s a quick summary of what we covered in this guide:

1. Disconnected payment systems can be resolved with a unified platform that allows you to access analytics, create reports, and combine payment functions in one place.
2. Expired card details can be managed with automation and a thoughtful tokenization strategy
3. Manual payment method integration is best replaced by a single endpoint which can be quickly customized as needed.
4. Multiple global payments partners could be substituted for one PSP which handles acquiring, processing, and currency exchange in many countries.‍
5. Guessing at ways to improve acceptance rates is far less efficient than accessing machine learning insights for payment optimizations.