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How important benchmarking your payments data is

Data from your payment service providers (PSPs) is a valuable source of information that can help you optimize your payment strategy. However, every PSP provides data in different formats, frequencies, and levels of granularity. To improve the setup of your connected PSPs, you need a solution to collect, unify and make data available for payments managers to analyze allowing you to maximize profits.

How to leverage Payments Data For Merchants

How to get the most value out of your PSP data

In this post, we cover some practical tips and ideas for how to: 

  • interpret your payment performance data
  • identify areas for improvement
  • implement smart changes to your payment setup

What is payment benchmark data?

When working with multiple PSPs, you have access to a vast amount of data that can help you optimize your payment strategy. To make this data usable, it is advisable to work with an organization like PaymentGenes or our partner, Tenner, that has the ability to collect and harmonize your existing data from your various PSPs.

By unifying this data, we create benchmark data that serves as a guide for analyzing how well you are performing with your various PSPs in key areas. Benchmarking PSPs is one of the most useful data insights for managing your PSP setup. Benchmark data covers important topics, such as:

  • Usage and authorization rates of alternative payment methods
  • Card authorization rates
  • Card types being used (corporate versus consumer, country of origin)
  • Chargeback rates
  • Costs per transaction

What can I learn from payment benchmark data?

Payment benchmark data shows you exactly how your company’s payment performance compares between the various PSPs that you work with. Specifically if you operate in multiple countries and sales channels, it can be difficult to perform analysis based on the standard PSP reporting, as it only represents a snapshot of your sales. 

"Benchmark data helps you spot where one PSP may be underperforming, so you can make smart improvements"

Now, instead of having to follow your instinct, you have factual statistical information to guide your decision-making. And this covers every topic related to your company’s payment strategy.

It is important to interpret benchmark data correctly though, so you can make the right decisions. Below, we show you how to optimize important areas of your payments strategy, based on what the benchmark data teaches you.

Card authorization

Your authorization rate refers to the number of card transactions that are completed successfully. These rates vary significantly by country and by industry vertical. The setup of your international sales is very relevant. Working with a PSP that directs transactions to a local acquirer helps increase your conversion rate and reduce acceptance costs compared to cross-border sales.

Because authorization varies widely by country, it can be difficult sometimes to understand whether you are performing well or not. That’s where benchmark data comes in handy, and you need the data from all your PSPs in one single overview.

If a card is declined, it is often for a legitimate reason (such as inadequate funds or a card being expired or flagged as lost/stolen). Yet these cases alone should not result in an excessively low authorization rate. If one PSP's authorization rate is far below the benchmark compared with your other PSPs, there is probably a technical reason that’s causing customers’ cards to be wrongfully declined. In that case, use A/B testing to try out different payment setups and see which yields the best results.

How to optimize card authorization

To prevent payments from being unnecessarily declined, you’ll need to work with PSPs that specialize in the local markets where you are doing business. Your PSPs need to be able to process transactions in the relevant currencies. They also need to be connected with the relevant local  acquiring banks in order to successfully complete transactions.

If you are dealing with a high number of declined card payments, be sure to encourage customers to pay using alternative payment methods. PayPal, online banking or buy-now-pay-later solutions are the leading payment methods in many countries. Offering a retry payment mechanism via alternative payment methods will result in an uplift in your authorization ratios.

Card types/country of origin

Benchmark data can also help you understand how card types and countries of origin affect your margins. Issuers and PSPs charge you higher transaction fees when your customers use special types of cards (such as corporate cards, prepaid cards and gift cards). Transaction fees also vary depending on which country of origin the card was issued in.

Your PSPs are able to determine card types and countries of origin based on the unique bank identification number (BIN) associated with each card.

How to optimize on card types/country of origin

If you are receiving an above-average number of transactions from special cards, consider applying a transaction fee during checkout for certain card types. This encourages customers to use alternative payment methods, or at least it covers the cost of the excessive fees.

In case of excessive payments using foreign credit cards, check which countries you are receiving payments from and make sure you are offering popular alternative payments for those countries (see below for more about alternative payment methods).

Chargeback rates

Chargebacks occur when a customer disputes a payment they’ve made to you and ultimately receives a refund from their card issuer. This is a double-hassle for you, because not only do you forfeit the customer’s payment, but you also pay transaction fees to your PSP and get nothing in return.

Are you experiencing an above-average chargeback rate? This might point to problems that extend beyond your payment strategy. For example, it could be a sign of lack of trust among your customers. It might also be a sign that customers are unhappy with your products, service or logistics.

How to minimize chargebacks

The best way to avoid chargebacks is to maintain healthy, trust-based relationships with your customers. This means offering a transparent, hassle-free customer experience, from presales, to checkout, to fulfillment and aftersales. Be sure you also communicate your shipping and returns policy proactively to manage the customers’ expectations and avoid misunderstandings.

"Maintain a healthy, trust-based relationships with your customers"

In some cases, chargebacks are issued for technical reasons. For example, a customer may have clicked the ‘Buy’ button repeatedly and submitted multiple orders for the same products. In worse cases, the customer’s card may have been used without their permission (theft or fraud).

To minimize the risk of fraud-related chargebacks, make sure to offer convenient yet thorough security measures during payment. Always require customers to input their credit card verification value (CVV), for example. Or use 2-factor authentication (2FA) or multi-factor authentication (MFA).

Costs per transaction

Transaction fees are a fact of life for all merchants, but if you are paying above the benchmark with a certain PSP, there are plenty of things you can do to bring those costs down to normal, or even lower.

Reducing your costs per transaction

Lowering your fees as a percentage of overall turnover starts with raising your average order value. Try offering free shipping on higher-value orders to encourage customers to buy more merchandise under a single order. Some PSPs offer discounts to merchants with higher average order values, which gives you even more incentive.

You should also do everything you can to optimize your payment strategy and steer customers towards cost-effective payment methods. That means minimizing chargebacks (see above), but it also means offering the right payment mix to cater to customers’ local preferences. That means offering popular alternative payment methods (see below) in addition to traditional international credit cards.

Use of alternative payment methods

Alternative payment methods (APMs) like digital wallets, buy-now-pay-later (BNPL), PayPal or bank transfers are now the most popular forms of payment in many countries. They give your customers the trusted, convenient payment options they prefer. Plus, they’re more secure, so you have lower risk of fraud, with fewer chargebacks.

The key to leveraging APMs is to understand local preferences. Each country has its own preferred payment methods. And your PSPs need to offer you the flexibility to cater to those needs.

Leveraging alternative payment methods

Work with your PSPs to select the best payment methods for each country you are doing business in. Ensure you have and can compare the payment data from all your PSPs to benchmark and find the best payment mix. For eCommerce merchants, you can optimize your checkout by automatically recognizing the customer’s country, based on the IP address of the device they’re using. Then, you can automatically preselect the most popular payment options for that country and offer them to the customer during checkout.

Keeping ahead of your competitors

As you can see, benchmark data from your PSPs helps you identify shortcomings and fine-tune your payments strategy. It is worthwhile to invest in solutions that collect and unify the payment data from your PSPs to create clear benchmarks so you can make informed strategic choices. It helps you make the right improvements, so you can start to outperform your customers. The great thing about these improvements is that they result in a better customer experience overall. And a better customer experience is essential for boosting conversion and encouraging repeat business and referrals.

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