E-commerce and online business have revolutionized the way we trade. Digital commerce removed most barriers and made it easier to launch businesses quickly and sell worldwide. As popular payment methods vary from one region or country to another, it is essential to properly understand how online payments function in order to optimize operations and reach more customers. In this Payments 101 digest, we will be updating merchants and payment enthusiasts alike with payment methods that will increase and optimize your acceptance rate as well as security measures that will mitigate fraud.
The purpose of online payments is to streamline and quickly accept funds in exchange of goods. While that may sound simple, there are multiple different factors to take into consideration in order to properly accept payments. As merchants, every website visitor has some form of interest in the goods or services that you offer online. Generally, website visitors will add items to the cart and then proceed to checkout. The checkout page is where leads turn into customers and having the right checkout page and the proper payment options will reduce the number of abandoned carts. On the other hand, a flawed payment architecture could also lead to fraudulent transactions and multiple transactions. Thankfully, there are ways to reduce abandoned carts and increase security measures.
The most basic form of accepting payments is generally through the means of credit cards and a payment gateway. Payment gateways such as Stripe, Worldpay, Global Payments and local payment gateways generally are generally the most commonly used way of setting up payments. The challenge becomes a bit more complicated when merchants try to enter markets where credit cards aren’t as popular. This is specifically the case in the Netherlands where most online transactions are done through the iDEAL payment system. iDEAL operates in a similar fashion as bank transfers however it is specific to the Netherlands. Similarly, digital wallets such as Apple Pay, Google Pay and Amazon Pay have increased conversion rates, sped up the checkout process and are much more convenient. As crypto currencies are gaining popularity, more and more customers are doing transactions using crypto currencies due to the extra layer of privacy.
Having a strong and properly planned out payment architecture will also reduce the number of chargebacks, fraudulent transactions and will also reassure customers that their payment information is safe and secure. Online fraudsters will launch credit card testing campaigns in order to find valid credit card numbers and then use the valid credit cards to do purchases. When the actual owner of the credit card becomes aware of the fraudulent charges on the credit card, they will resort to disputing the transactions. The dispute will most of the time end up as a chargeback which would mean that the funds will be returned to the credit card owner. There are no guarantees that the goods and services will be returned to you. In order to avoid chargebacks and credit card fraud, as a merchant you can resort to security measures such as 3DS 2.0, Address Verification checks and other anti-fraud algorithms. These algorithms will often look at the purchasers IP address location in comparison to the actual address.
Dealing with payment gateways can be quite difficult and expensive. Payment gateways negotiate their own rates with the card brands such as VISA and MasterCard, which means that the processing fees can fluctuate. Having multiple payment gateways ensures that you can send traffic to specific payment gateways based on specific conditions. This process is generally called payment orchestration.
Payment orchestration allows merchants to make their payment architecture smarter. Another example of how payment orchestration can be crucial to a business is in the case where a main payment gateway is down. These down times are outside of anyone’s control and often come at unexpected moments. In order to avoid down times, transactions can be sent to an alternative payment gateway which will allow the business to keep accepting transactions.
While the payment industry is fast evolving, it is important to continuously keep up to date with the newest technologies and innovations. Newer payment options could lead to faster checkouts, higher acceptance rate and in some cases lower payment processing fees. This weekly Payments 101 digest will cover important aspects of the payment industry and answer the most common payment related questions.
