During this pandemic, we are all increasingly shopping online and, for many businesses who have historically relied on in-store sales, that means navigating a totally new landscape. These retailers are looking for solutions to optimise digital sales and remove friction from the payment acceptance process, but in a way that doesn’t compromise security.
To achieve this, there are a number of challenges that merchants face. For over a third of SMEs who have moved their operations online for the first time in response to the crisis, the biggest challenge is getting set up and having all the right tools and capabilities to allow them to trade online. From a payments perspective, this means having the right gateway and acquiring facilities and having them configured correctly to maximise acceptance rates.
The second challenge is deciding what your appetite for risk is as a business and developing your payments strategy accordingly. Depending on the value of the goods you’re selling, it’s important to have screening tools in place to protect your business from fraudulent transactions and data breaches.
Some payment types and transactions carry more risk than others. For e-commerce, the level of risk that a merchant is exposed to can be significantly reduced by Strong Customer Authentication (SCA). SCA is a regulatory requirement is being brought in to protect consumers and businesses from fraud.
In practice, it means customers are not able to checkout online using just their credit or debit card details. They also need to provide an additional form of identification such as a PIN code, a fingerprint or a passcode sent to their mobile phone. This is known as two-factor authentication and is enabled through 3D Secure (3DS).
While that process can make online transactions much more secure, it can also introduce unnecessary friction into the customer journey and can adversely affect basket abandonment rates. Businesses therefore need to tread carefully to ensure they are moving customers through the online checkout process in as smooth and secure a way as possible.
1. Choose the right payment gateway for your business
Different gateways will offer different capabilities and versions of 3D Secure. The new, upgraded version of 3DS (3DS Version 2) offers some significant improvements and benefits to businesses and consumers. If you’re a consumer, it’s much easier to use if you’re shopping through a mobile device, such as a phone app or tablet. If you are a retailer, it helps to limit friction and potential customer drop-out rate, meaning fewer shoppers abandon their online baskets and more go through to complete the payment process.
2. Take advantage of SCA approved exemptions
Research from Ravelin suggests that actively authenticated (3DS) transactions can take up to an additional 37 seconds – a significant delay for shoppers used to one-click or contactless payments.
Automatically routing all transactions through 3DS could have a negative impact on customer satisfaction and may result in fewer purchases. So our advice to is to use 3DS selectively for those transactions which carry a higher risk.
Businesses need a clear strategy, taking advantage of SCA-approved ‘exemptions’ to balance fraud protection against customer experience and ultimately the rate of transaction success they wish to achieve. As part of that, they need to be clear on which exemptions they wish to use, and work with their acquirer and gateway partners to deliver them.
3. Flag transactions correctly
We see a lot of online businesses mix up how they ‘flag’ their transactions. Different terminology is used – including wording such as “recurring”, “card-on-file” and “merchant-initiated” – and inconsistencies can mean that some payments are declined. Merchants should therefore work with their acquiring and payments gateway partners to ensure that transactions are flagged correctly and, in the process, to increase the rate of payments that get accepted.
4. Know your customers and the payment type they prefer
Consumers now have a plethora of different payment methods to choose from, from more ‘traditional’ card schemes such as Visa to digital and mobile wallets like PayPal, Apple Pay and Google Pay. This extends to payment methods such as Alipay and WeChat Pay that are popular in other parts of the world. It’s vital, therefore, that you understand your customer base and accommodate transactions for the most popular payment types. Some will carry more risk than others and again, it is crucial to work in partnership with acquirers and payment gateways to mitigate against any security concerns.
5. Take advantage of the industry tools available
For larger retailers, who regularly process transactions with the card details they hold on file, one of the biggest reasons for transaction decline is out-of-date or expired credit card details. It is key to use industry tools such as account updater services which allow users to pull out the latest card details registered for a specific customer. Not all acquirers and gateways use these services, but we have found them to be very useful in increasing payment acceptance rates for regular transactions.
6. Use data analytics
Another big reason for transaction declines is unavailable funds. There will be specific, regular times in the day that funds (such as a regular payment from an employer) clear into customer bank accounts. Data analytics can help merchants find out the optimum time to process transaction batches and achieve a higher percentage of those transactions being approved by card issuers.
Whatever the size of your business, the commercial case for streamlining the online payments process is clear. Work with your acquirer and payments gateway to reduce friction, reduce fraud, increase payments acceptance, and ultimately drive up your sales figures. When the world is increasingly searching for products and shopping online, you can’t afford not to.