September 6, 2024
For 90 minutes on a Saturday in 2019, retail giant Target could not process payments. For a local shop on the corner, losing 90 minutes might have been only a minor inconvenience. But not for Target. According to Data Center Knowledge, the one-time glitch “could have cost the company about $50 million in lost sales.”
According to Data Center Knowledge, the one-time [payment] glitch “could have cost the company about $50 million in lost sales.”
This highlights a challenge for successful companies: the more transactions your company handles, the bigger the risk of lost revenue. According to the Chargeback Pulse report of 2023, a quarter of merchants now lose $5 million a year from chargebacks alone. A poor payment recovery strategy can be a leak in your revenue pipeline—one in desperate need of patching.
But here’s the good news: if you optimize your payment processes, you can go beyond recovering lost revenue. Some companies improve their profit margins by 5-10%. Let’s explore the key strategies to use enterprise payment processing solutions and optimize your payment strategies.
Payment processing isn’t a perfect science. A few issues in particular can eat away at your margins:
Paying back a customer due to payment fraud might seem like a minor, one-time inconvenience. But if it’s a frequent occurrence, it can mean lost sales and customer frustration. Angry customers may even “churn,” turning to other companies with whom they feel more secure in their payments. To avoid that kind of opportunity cost with loyal customers, you’ll need a proactive approach to optimize your payment processing.
Payment orchestration refers to managing your payment processes—including multiple gateways and service providers—to make each transaction as smooth as possible. Ideally, a payment orchestration platform (POP) becomes the “conductor” of the symphony of technology behind the scenes. And all you hear is the sweet music that results.
Why bother with payment orchestration platforms? A few reasons:
But even with a payment orchestration platform in place, you need to be proactive to avoid lost revenue. Here are some key strategies you’ll want to implement right away:
You won’t have to rely on a single merchant account provider for your transactions if you have a diversified network of acquirers. High fees due to lack of competition between third parties? Transaction failures thanks to geography or risk assessment issues? When you use multiple acquirer strategies, you can access more competitive fees— leaving more wiggle room to improve your revenue recovery.
Of course, to get the most out of leveraging multiple merchant accounts, you’ll need strategy number two:
Dynamic routing lets your POP automatically direct transactions through the most reliable and efficient payment channels. Your platform can use real-time data to select the best payment processor and merchant acquirer for each transaction. The result? Fewer declined payments and the costs associated with them.
It’s inevitable: a transaction is going to fail. Retry logic can automatically attempt the payment again—often with a higher success rate than manual retries. If your payment platform uses effective retry strategies (like staggering retry attempts or varying payment methods), it can decrease the chances of a declined transaction. This is especially important for subscription-based purchases. And on the flip side, that can increase the amount of revenue you can recover.
According to Merchant Savvy, losses in online payments due to fraud will total over a third of a trillion dollars between 2023 and 2027. Mitigate fraud, and you automatically increase revenue by cutting the associated costs of fraudulent transactions.
Losses in online payments due to fraud will total over a third of a trillion dollars between 2023 and 2027.
Payment orchestration platforms can use advanced features—like machine learning-based fraud detection—to help identify and block fraudulent activity. Over time, fraud detection will become more sophisticated and better able to separate fraudulent charges from legitimate transactions. This reduces fraud and improves the success rate of honest transactions, reducing the need for customer service due to a failed genuine transaction.
Knowledge is power. The better you know your data analytics, the more you can monitor payment processes—sometimes in real time—and identify specific areas for improvement. Watch for key metrics like success rates, decline reasons, and routing efficiency to make sure your transactions are smooth for customers. And if any metric lags behind, you can focus on improving it to enhance the customer experience.
Glovo, a delivery app that connects users with businesses and courier services, obviously needs sophisticated payment systems. However, its authentication success rates sometimes prevented would-be users from signing up, resulting in lost revenue.
Glovo turned to a platform to optimize its 3D Secure authentication process. By implementing new fraud prevention risk engines, the company smoothed out the authentication systems without increasing the risk of fraud. As a result, it achieved a 97% authentication success rate.
Some experts call the current payment landscape “Payments 3.0,” where transactions are so seamless that users don’t even realize they’re paying. “The classic Payments 3.0 experience is Uber, where you don’t even realize that you’re making a payment,” said Danny Shader, CEO of PayNearMe. Optimizing your payments strategy with the strategies above is how you can achieve this level of seamless transactions—and recover lost revenue.
Strategies like optimizing your payment structures and using automatic payment retries can outsource some of the most difficult aspects of payment transactions to make your customer interactions more seamless. But maybe you’re not sure where to get started with a platform to implement these strategies.
Clear Function’s expert can take all these strategies and implement them into a smooth solution to track your lost revenue and optimize it until you turn it into regained revenue. Interested in learning more? Book a call now to learn more about payment orchestration and how we can help drive revenue growth.
