A high payment success rate is crucial for businesses of all sizes. GoCardless reported that card payment failures average 10% to 15% globally. In emerging markets, this rate skyrocketed to 40%. Such failures result in immediate revenue loss and long-term customer loss. On top of that, a staggering 62% of customers will likely avoid a website after a failed payment.
The data above highlights the significance of achieving high payment success rates. A higher success rate guarantees revenue and establishes a competitive advantage by delivering a streamlined payment experience.
What Is Transaction Success Rate?
Transaction success rate calculates the fraction of transactions that conclude successfully. Typically expressed in percentage, it illustrates the number of successful transactions for every 100 attempts on your app or website.
For instance, if 85 of every 100 payments are successful, the payment success rate stands at 85%. This metric may also account for instances where customers repeatedly attempt to complete a failed payment. This means the payment success rate might not perfectly align with your revenue.
Factors Influencing Transaction Success Rates
Several factors play a role in influencing the transaction success rate. Understanding and optimising these factors can lead to a marked improvement in the completion of online payments.
Firstly, payment method compatibility is important. It's essential for businesses to support a range of payment methods that cater to diverse customer preferences. This compatibility also includes digital wallets, bank transfers, and emerging payment technologies. The more payment options a business offers, the higher the likelihood of successful transactions.
Another significant factor is the implementation of fraud prevention measures. While it's critical to have robust systems to detect and prevent fraudulent activities, these systems must be carefully calibrated. Overly stringent fraud prevention can inadvertently block legitimate transactions. This can decrease the transaction success rate. Therefore, finding the right balance between security and transaction fluidity is crucial.
Network connectivity also plays a vital role. In today's digital age, a stable and fast internet connection is necessary for seamless transaction processing. Poor connectivity can lead to transaction timeouts or failures. This frustrates customers and potentially drives them away. Ensuring the business's and the customer's internet connections are reliable can significantly reduce payment disruptions.
Finally, the user authentication process is a critical aspect. While it's important to verify the identity of customers to prevent fraud, the authentication process should not be cumbersome. Complex or time-consuming authentication can deter customers from completing transactions. Streamlining these processes, perhaps through one-tap logins or biometric verification, can enhance the user experience while maintaining security.
Challenges Around Transaction Success
The challenges surrounding transaction success, especially when dealing with multiple payment methods, are complex and can impact businesses significantly. Here's an overview of some of the key issues:
Complexity of Integrating Multiple Payment Systems: Integrating various payment systems is often a complex task due to the diverse payment method options, such as credit/debit cards, digital wallets, bank transfers, and cryptocurrencies. Each method may require different integration approaches, APIs, and compatibility standards. This complexity can lead to increased development time and costs. Maintaining these integrations requires ongoing effort, as payment systems continually update their features and security measures.
Compatibility Issues: The interoperability of different payment systems can pose significant challenges. Systems developed by different providers or in different regions may only work with one another. This often leads to transaction failures or errors. Ensuring compatibility across different platforms, currencies, and countries requires a robust technical infrastructure and often involves navigating regulatory differences between regions.
Security Concerns: As the number of payment methods increases, so does the challenge of maintaining high-security standards. Each payment method has its own set of security protocols and vulnerabilities. Businesses must comply with standards like PCI DSS (Payment Card Industry Data Security Standard) and implement strong encryption, fraud detection, and risk management strategies.
User Experience and Reliability: Providing a smooth and reliable user experience across multiple payment methods is crucial for customer satisfaction. Complications in the payment process, such as slow transaction processing, payment gateway downtimes, or difficult navigation, can lead to cart abandonment. This eventually leads to a loss of sales. Ensuring a consistent and user-friendly interface while handling multiple payment methods is a challenge that requires careful design and testing.
Cost Implications: Implementing and maintaining multiple payment systems can be expensive. Businesses often incur transaction fees, integration development, security compliance, and ongoing maintenance costs. Balancing these costs while offering various payment options to cater to customer preferences is a strategic challenge.
Regulatory Compliance and Legal Issues: Different payment methods are governed by various regulations and laws, which can vary significantly across regions. Businesses must comply with regulations like GDPR in Europe for data protection, anti-money laundering laws, etc. Non-compliance can result in fines and legal complications.
Currency and Exchange Rate Management: Dealing with multiple currencies can be challenging, especially when managing exchange rates and transaction fees associated with currency conversion. Fluctuations in exchange rates can impact pricing and profitability.
Understanding Payment Failures
Payment failures can occur due to many reasons, both on the user's side and on the payment orchestration side.
User-Side Errors
Insufficient Funds: The most common cause of payment failure. The payment will be declined if the user's account does not contain enough funds to cover the transaction.
Incorrect Details Entered: Users sometimes enter incorrect account details, such as the wrong card number, expiry date, CVV, or billing address. This mismatch leads to a transaction failure.
Card Restrictions: Some cards may have restrictions for online transactions, international purchases, or limits on transaction amounts. Users might be unaware of these restrictions, leading to declined transactions.
Expired Card: Users might attempt to use an expired card, resulting in an automatic decline of the transaction.
Bank Account Restrictions: Similar to card restrictions, some bank accounts have limitations on transaction amounts or types of transactions allowed.
Connectivity Issues: Poor internet connection can disrupt the transaction process, leading to a failure.
Payment Orchestration Errors
Technical Glitches in Payment Gateways: Payment gateways can have technical issues, such as server downtime or software bugs, leading to transaction failures.
Bank Server Issues: Sometimes, the failure occurs due to issues on the bank's end, such as server outages or maintenance activities.
Payment Processor Failures: Failures can occur in the processing stage due to technical glitches, high traffic, or issues with third-party services involved in the transaction.
Security Flags: Payment systems are equipped with fraud detection mechanisms. A legitimate transaction might sometimes be flagged as suspicious if the bank sees it as an unusual purchase pattern.
Currency Conversion Issues: In cross-border transactions, failures can occur due to currency conversion issues or limitations set by either party's financial institutions regarding international transactions.
Compliance and Regulatory Issues: Transactions may be declined if they fail to comply with the regulations, like anti-money laundering checks.
Can a Payment Fail After a Successful Transaction in Online Banking?
Yes, a payment can fail after it initially appears to be successful in online banking, due to several reasons:
Insufficient Funds: A transaction might initially be authorised, but upon final settlement, the account may not have sufficient funds, leading to a failed transaction.
Account Restrictions: Certain post-transaction checks might reveal issues like account restrictions or compliance issues, leading to the reversal of the transaction.
Technical Issues: Technical glitches in the bank's system or the payment gateway can lead to the reversal of a transaction after it was initially successful.
Fraud Detection: Banks continuously monitor transactions for fraudulent activity. A transaction that initially seems legitimate might later be flagged as fraudulent, causing the bank to reverse it.
How to Improve Payment Success Rates
Improving payment success rates is crucial for businesses, particularly in e-commerce. The following strategies can help enhance these rates:
Offer More Payment Methods
There's no universal solution for consumer payment preferences. Offering various payment methods caters to different customer needs. The rise of digital wallets, buy now, pay later solutions, and digitised cash payments has changed the payment landscape.
Limiting payment options to only cards or bank transfers can alienate potential customers. To maximise conversion and success rates, businesses should provide a range of payment methods. This approach addresses diverse customer preferences and increases the likelihood of successful transactions.
Optimise the Checkout Page
A user-friendly checkout process is key. High dropout rates are often due to complex or lengthy checkout processes. This is why offering a guest checkout option and one-click payments for returning customers can significantly improve conversion rates. Tailoring the checkout experience to local currencies and preferred payment methods can also build trust and increase conversions.
Implement a Failover Strategy
Payment processors can experience downtime, more so in emerging markets with unreliable infrastructure. Having a secondary payment provider ensures business continuity during primary provider outages, reducing lost revenue and customer dissatisfaction.
Utilise Payment Data
Understanding why payments fail can help increase success rates. This involves analysing technical issues or specific transaction types that are prone to failure.
Routing transactions to payment service providers with the highest authorisation rates for certain types of transactions can improve success rates. This is particularly important for businesses operating in different regions, as gateway performance varies by location.
Implementing systems that automatically switch to different gateways or payment methods and retry transactions can enhance payment success rates.
Work With Experts
Managing multiple payment methods across different markets can be complex and requires specialised skills. Identifying and resolving payment errors, especially in recurring billing models, can be challenging. Expert support is crucial for diagnosing and proactively addressing these issues.
Minimising obstacles during the payment process is essential. This includes reducing the steps in the checkout process, providing clear instructions, and ensuring the payment page loads quickly and efficiently.
Payment Success Solutions
At APEXX Global, we offer a comprehensive payment orchestration platform that connects our clients to the global payment ecosystem through a straightforward API. Our platform is designed with a strong focus on the needs of merchants. We provide them with global e-commerce solutions, bespoke consulting services, and intelligent routing to optimise payment flows.
We are committed to helping our clients maximise their conversion rates while minimising costs and ensuring an efficient and effective payment processing experience. Please visit our service page for a deeper understanding of our services and how we can assist you.
