5 Risks in Implementing a Payment Solution

On a macro-level, glorious predictions are constantly made about the future of the global e-commerce industry. Take, for example, a Statista report, which reveals that e-commerce was responsible for around $2.3 trillion in sales in 2017 and is expected to hit $4.5 trillion in 2021.  With such promising revenue expectations, it is no wonder e-commerce businesses are constantly opening up online.

However, on a micro-level, most are painfully aware of the harsh truth that competition is fiercer than ever and therefore these stats are not quite reflective of today’s reality.  From small to large businesses,every online merchant feels the competitive heat. Naturally, in online retail, most believe Amazon is the number one culprit, eating up the market, where it  accounts for  44% of all U.S. e-commerce sales. Yet, it is not just this 800-pound gorilla’s domination; competition is coming from every corner, even mom and pop shops are going online.

From perfecting SEO strategies to placing the right ads on Facebook and of course offering customers aesthetically appealing web sites, today’s sophisticated online merchants are convinced they are doing everything possible to stay a cut above the rest.  It’s a pretty sure thing that, while the integration of online payments is part of the ‘check list’, the reality is that merchants do not really pay much attention to the critical role it plays in their overall success.

How customers pay is in fact just as important – if not more – as everything else a merchant does to become profitable. Online payments simply doesn’t boil down to just setting up a payment page, but rather involves many complex aspects, and those merchants that do not take it seriously expose themselves to harsh risks that will hurt their bottom-line.

Here are the top five risks online merchants typically face when they do not implement the right online payments strategy:

 

I – Fraud, Your Worst Criminally-infested Enemy

With EMV chip cards making Card Present theft more difficult, fraudsters are moving their efforts online across the globe. Take the U.S. as an example. According  to Aite, an independent research and advisory firm,  in 2016, Card Not Present (online) transactions accounted for 45% of all credit card fraud in the U.S. That number is only on the rise with the widespread adoption of EMV technology across the country.

While Card Not Present fraud has risen due to the implementation of EMV chip technology, there are other factors that obviously play a role too, such as the increase in online sales and the fact that fraud prevention tools have not either been fully adopted or implemented by all stakeholders or are not used in the correct way.

Merchants unequipped with the right fraud prevention tools are not only exposing themselves to criminal activities but their customers as well.

II – Card Declines Hurt Conversion Rates

Card declines are a sore point for merchants as they ultimately lead to lower conversion rates. There are several reasons they happen and not all of them are fraud-related and nefarious. For example, card declines can happen simply due to ‘system bugs’ on the card scheme or card issuing side or punching in too many or the wrong CVV numbers.

Gaining insight into reasons behind card declines can point the way to fixes, leading to higher approval rates, conversions and ultimately increased revenue.  A combination of the right technology tools coupled with human experts that know how to deeply analyze and fix issues associated with card declines, is the smartest path to take to properly fix this problem.

It is possible for merchants to potentially recover anywhere between 1% to 15% of otherwise lost transactions by working together with their processor/acquirer to minimize card declines.

III – Your Invisible Cash Flow: Alternative Payment Methods:

Online shoppers abandon their shopping carts 68%of the time, and, sadly in many cases merchants are not even aware of these abandonments.  One of the key contributors these days is the lack of Alternative Payment Method (APMs) alternatives to traditional credit card payments. It is no longer a “nice to have” but a “must have” situation when it comes to local payment preferences, especially across Europe.

Take Germany as a perfect example. Credit card payments are not the payment of choice in the country, but rather direct payments from bank accounts are preferred.  If a merchant neglects to offer alternative payments, cart abandonment will naturally rise in those countries that have unique, local payment methods.  Merchants need to consider APM offerings an invisible cash flow they are not seeing that can exponentially increase their bottom-line.

However, simply adding APMs is not enough. To succeed, merchants need to work with APM experts that are deeply rooted in solving the complexities – including technology integrations – surrounding implementing APMs.

IV – 3-D Secure, not Being Used Wisely

3-D Secure definitely adds an extra layer of security, and merchants are expected by most major card schemes to implement the technology as part of their overall online payment strategy. Yet, in all honesty, the technology is often referred to the ‘silent killer’ that frustrates consumers when they are shopping as it requires extra steps to get authenticated.

In addition, merchants do not quite use the technology wisely and efficiently, as in many cases not every transaction needs to include the extra layer of 3-D Secure. Why then should a merchant blindly slap on the solution to every transaction, potentially causing them to lose that consumer’s online purchase due to the tedious process?

Knowing when to leverage 3-D Secure is not simple, and merchants must work with the right payment providers that fully understand every aspect of it, from knowing the card scheme rules associated with implementing the solution to being smart enough to recognize which transactions can safely go without 3-D Secure.

V – Data –  Needs to be Taken More Seriously: 

Great traffic and conversions are the lifeblood of a successful e-commerce business.  Yet equally important is the need to ensure merchants get a steady flow of the right data as well as full transparent visibility into transaction patterns and obstacles.  Therefore data-driven reporting is a critical part of online payments as it’s the solution to ensuring merchants receive the data they need. They depend on it for various reasons such reconciliation as well as not falling prey to hidden fees associated with processing payments.

Merchants need to see the exact details of fees they are charged, and good reporting allows them to do so properly. It is critical for them to have full transparency, to see if/when they are charged incorrectly.  It is up to the processors/acquirers to be fully transparent with their merchants on fees.

In addition, reporting is crucial for back-office reconciliation. Merchants depend on strong data-driven reporting from their payment providers to help them with back-end reconciliation leading to wiser business decisions.

It is not a ‘sure thing’ all providers have sophisticated BI tools needed to extract the right data, and therefore merchants need to do their homework and find experts in this area.

Having a Laissez faire attitude when it comes to online payments can lead to some risky business for online merchants. They need to do their research and find the right payment providers – and there are some brilliant ones out there – that will guide them wisely, ultimately ensuring any invisible money lost to these risks is uncovered!

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