Voice of the Industry

Why it is time to give payments a seat at the table

Tuesday 12 September 2023 08:38 CET | Editor: Irina Ionescu | Voice of the industry

Julie Simon, VP of Demand Generation, Content, and Indirect Channels at Nuvei, dives deep into the digital payments industry, emphasising on optimisation to help companies thrive and boost customer experience in a highly competitive market.

Ecommerce has evolved significantly in the last few years, ushering in an era of connected payments. This era is characterised by the emergence of innovative payment types, cutting-edge payment infrastructure, and novel business models. 

A key symptom of the connected payments era can be observed in the fact that successful businesses have started to embrace the power of payments as a revenue accelerator. Payments are no longer viewed as the cost of doing business but rather as an opportunity to accelerate revenue, reduce the overall cost of processing, and improve the customer experience. 

Payment departments in today’s environment are focused on constant optimisation because they recognise the strategic significance of payments to a business’ strategy and long-term plans. There are a lot of misperceptions about payments and it’s the payment industry’s job to educate, dispel common myths, and push for payments to ‘have a seat at the table’ in any ecommerce business.

Busting the fraud myth 

Fraud has long been recognised as a significant financial burden to ecommerce businesses, resulting in massive cost implications. While fraud is often perceived as a primary drain on a company's resources, the impact of false declines is far greater. 

False declines happen when legitimate payment attempts are inaccurately flagged as fraudulent and, subsequently, rejected. In 2022, losses due to online payment fraud were estimated at 41 USD billion globally. In 2021, false declines cost businesses USD 430 billion, proving that the latter comes at a far greater cost. Not to mention the fact that, in the case of fraud, it is either the merchant or the issuing bank who foots the bill, depending on circumstances. In the case of false declines however, it’s the merchant who loses – every time. 

These false declines not only result in immediate revenue loss but also undermine customer confidence, potentially leading to long-term revenue erosion. Revenue loss from false declines points to the fact that identifying legitimate transactions is just as important as identifying the fraudulent ones. 

Luckily for businesses, the occurrence of false declines can be reduced by taking a proactive, strategic approach to risk management – one that balances fraud prevention measures with a smooth customer experience. Using Artificial Intelligence and machine learning-powered fraud detection tools, customising detection settings, and implementing multifactor authentication are just a few examples of ways in which legitimate transactions can be identified and processed, hence directly contributing to a business’ bottom line. This process requires constant optimisation and monitoring, but true payment optimisation doesn’t stop there.

Optimise, optimise, optimise 

Payment optimisation is the strategic process of fine-tuning every aspect of the payment journey, from the point of purchase initiation to the final confirmation. It involves implementing measures to increase transaction approval rates, reduce payment processing costs, and ensure a frictionless, secure, and familiar payment experience for customers. If properly implemented and optimised, these measures can hugely impact a business’ bottom line. 

Increasing transaction approval rates sounds relatively straightforward and the approval rate is a key metric businesses measure. In reality, there are many tools that can contribute to increasing authorisation rates, including: 
  1. Decline recovery – Prevents cart abandonment by offering customers an alternative way to complete their transaction. Designed to increase approval rates, it triggers an automatic response upon refusal, enabling customers to select another payment method or to be connected to the merchant’s support team.

  2. Partial approval – Increases approval rates by triggering an automatic response upon refusal, enabling consumers to select another payment method. Partial approval allows the end-user to successfully complete a deposit even if they do not have sufficient funds in their account. This can have categoric impact, since nearly 40% of credit card declines happen due to the cardholder's lack of funds.

  3. Account updater – Reduces customer attrition due to credit card account changes through an automated process of updating cardholder account information, which ensures uninterrupted payments for recurring billing and subscriptions. Ultimately, this reduces time and cost associated with manually updating card data and ensures payments don’t get declined due to incorrect or expired card details.  

  4. Tokenization – Enables customer card details to be stored under a unique, safe, and unidentifiable network token. This technology minimises the merchant’s PCI compliance by making cardholder data inaccessible, as well as helping to reduce the fraud risk. Tokenization of card data also makes it possible for merchants to seamlessly enable subscription and one-click payments; both of which can have tremendous revenue enhancing potential.  

There is always going to be a cost associated with processing payments. Despite this, there’s no reason why the cost cannot be optimally controlled. The complexity of new payment types across regions and the multitude of players in the ecosystem highlight the importance of a holistic vision of payment flows and the need for payment orchestration. 

One of the most obvious examples of this would be the smart routing feature. Merchants can create their own routing parameters to determine how each payment transaction is processed – sending transactions to the most relevant and cost-efficient acquirer every time, increasing authorisation approval rates, and minimising fees. 

In-house research from Nuvei shows that some organisations utilise up to 20 different payment providers in their payment stacks, especially when operating in multiple markets. Payment orchestration platforms are an excellent way to help streamline the management of these providers and give the merchant full control over decisions that can seriously improve or hinder their companies bottom line. 

The payment stage is the last step in the customer journey and a crucial phase for the merchant. Successful businesses have started to consider the payment stage as key to the overall customer experience to boost revenue. 

But what matters most to the consumer when reaching the all-important payment page? In our experience, their expectations are often related to seamlessness, security, and choice. 

The digital shift has changed consumer expectations regarding speed and convenience, and this extends to payments. Making the payment flow frictionless and fast is no longer a key differentiator. Some of the tools referenced earlier, namely account updater and one-click payments contribute to creating a frictionless and fast experience for the customer, hence maximising conversion and, therefore, revenue. 

Consumers are also preoccupied with security, especially as fraudsters are getting more and more astute. So, a frictionless payment experience shouldn’t come at the expense of a secure one. But there are clever ways to use technology to ensure utmost security while minimising friction. Tokenization and multi-factor authentication thorough using facial or fingerprint recognition are perfect examples of ways in which transactions and customer details can be accurately secured and verified. And the best part? Consumers already expect it.

Last but most certainly not least, we have customer choice. The last few years of digital evolution have given rise to a multitude of innovative alternative ways to pay. These often differ by region or even country and are inherently related to culture and customs. It is crucial for businesses to offer their customers choice in how to pay for their goods and services, especially when operating in multiple distinct markets. 

Taking Europe as an example, expanding into the Netherlands would prove difficult without offering iDeal, while in Poland Blik reigns supreme. The French love Carte Bancaire, while in Croatia cash is still widely used, so digital top-up wallets are popular. Offering the right mix of payment methods in the right regions has become vital to the success of any business – especially those with global expansion on their roadmap. 

To conclude 

In the evolving ecommerce landscape, the rise of connected payments emphasises the need for a strategic approach to drive revenue and cultivate customer loyalty. Acknowledging the pivotal role of payments strategy is paramount. Falling behind means forfeiting the chance to shape a future where payments actively steer success in the ecommerce industry, underscoring the importance of giving payments a seat at the table. 

Our new study, written in collaboration with IDC, explores why innovative businesses now recognise payments as a crucial element in customer experience and business growth. To find out more about how payments can be utilised to drive revenue for online businesses, download the study here.

About Julie Simon

Julie leads Nuvei’s demand generation, content, and indirect marketing teams. As part of her role’s broad remit, Julie is involved in all aspects of marketing to prospects and partners across all Nuvei’s digital & physical channels. With a focus in the financial services and payments space, Julie’s 20 years' experience in international markets includes Head of Marketing at Temenos and ISV Partner Marketing Manager at AWS, both in APAC.  

About Nuvei

Nuvei (Nasdaq: NVEI) (TSX: NVEI) is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible, and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk, and fraud management services. Connecting businesses to their customers in more than 200 markets, with local acquiring in 45+ markets, 150 currencies and more than 600 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration. For more information, visit www.nuvei.com 

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Keywords: online payments, ecommerce, digital payments, digitalisation, fraud prevention, false declines, machine learning, artificial intelligence, fraud detection, checkout optimisation , payment methods, tokenization, PCI compliance, one-click payments, payment processing
Categories: Payments & Commerce
Companies: Nuvei
Countries: World
This article is part of category

Payments & Commerce


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