Are you maximizing your revenue potential?

To help maximize revenue, you must optimize payments on the frontend and the backend. Discover how PayPal’s unique differentiators may give you the edge.

Across industries, markets, and business sizes, conversions are always top of mind. They’re what help drive revenue – by reaching new markets, increasing existing market penetration, and encouraging repeat purchases and higher spend. But what do you think of when you think of conversions?

You most likely think of the frontend: your website layout, your mobile experience, your product pages, and shopping cart. These can be essential. The frontend of your ecommerce platform should be designed to reduce abandonment and facilitate a smooth checkout across channels. The payment methods you offer should be highly trusted and eliminate the need to type in payment and personal information.

But many large enterprises forget about the other half of the equation: the backend.

False declines and slow approval speeds can have a major – and invisible – effect on your customer experience. If a transaction is declined, a customer may abandon cart and leave with a tainted image of the brand.

In this report, conducted with trusted payments industry experts Mercator Advisory Group, you’ll learn:

  • How to optimize your checkout experience to help significantly increase the likelihood of a conversion.
  • How PayPal’s global network can lead to higher-quality data, more sophisticated risk scores, and better authorization rates.
  • How a 2% increase in approvals could translate into more than a million dollars of previously unrealized revenueii

Key findings from the report

This white paper exposes the complexities associated with front-end payments operations that impact the likelihood of purchase across the buyer journey, as well as back-end operations that affect payment authorization rates.

On the frontend: Optimizing the buying experience to increase conversion

Mercator research suggests that optimizing the checkout experience can significantly increase the likelihood of a conversion into a purchase. While abandonment rates vary by category and average ticket price, research2 suggests that more than 80% of visitors to a merchant’s website leave without placing an item into the shopping cart. This significant dropout rate makes the remaining 20% of customers that enter the conversion phase critical to the merchant’s profitability. Consumers have strong preferences regarding mode of payment, and when a preferred payment method or brand isn’t available, the site will experience a larger than usual cart abandonment rate.

A simple way to help reduce friction is to make sure the consumer’s preferred payment method is available during the checkout process, and preferably methods that have their card and personal information already stored.

In addition to offering relevant payments options for a smoother checkout, merchants should also consider leveraging commerce tools along the buyer journey that offer promotions or re-target customers who have abandoned their carts.

On the backend: Optimizing processing to boost approval rates

While most merchants focus on improving the customer front-end experience, back-end optimization is equally crucial to conversion and revenue capture. In fact, authorization rates have become increasingly important not only to merchants, but to players all along the payments value chain, including acquirers, payment networks and even card issuers, all of which could benefit from higher authorization rates and reduced fraud.

Consumers also benefit from authorization optimization when a transaction is processed without disruption. Many gateways collect information that they analyze to improve authorization rates, make smart routing decisions, and reduce fraud and disputes.

Better data leads to better outcomes

The right decision is dependent on having the right data analyzed quickly to make payment decisions. Acquirers and gateways are building their value proposition for merchants along these lines by utilizing machine learning tools that evaluate millions of online transactions to distinguish between legitimate buyers and fraudsters. This includes scrutiny of transactions performed through the gateway, data that the networks make available, data that the gateway has access to due to other business relationships, and third-party data that the gateway purchases.

Clearly, collecting and analyzing all of these factors requires a payments partner that has a broad presence and deep expertise. Reviewing these and other factors on a regular basis, it is possible to improve authorization rates so that merchants can deliver the best possible experiences to their customers while also capturing the highest possible revenues.

Managing disputes

For every transaction a merchant approves, there is some risk that it will generate a cardholder dispute. Disputes have increased in part because issuers are making it easier for consumers to lodge disputes by automating the process online. A one-click dispute is sent from the issuer to the card network, which forwards it to the acquirer, and finally from the acquirer to the merchant. These disputes are managed by strict U.S. card network rules.

Dispute management is an area where a good payments provider can help by maintaining records associated with each transaction in a PCI-compliant environment. The acquirer’s fraud management solution should keep disputes low, but when disputes do arise the acquirer should be able to provide the merchant data that can be used during the representment phase of the dispute.

The PayPal approach to conversion

There are a range of actions merchants can take to increase revenue, but too many fail to understand the revenue potential of optimized payments. Small improvements can help increase the number of shoppers that make it through checkout and the number of transactions that are ultimately authorized so revenue can be realized. These improvements require precise and coordinated monitoring across the payment process so each step can be examined and measured.

The keys to success are a simplified checkout, presentment of the right payment methods, and optimized processing that boosts authorization rates while keeping fraud and dispute rates low. After evaluating PayPal’s enterprise-grade platform, we conclude that it has distinct advantages in three critical areas:

  • First, PayPal has access to multiple, unique data sources due to its hundreds of millions of consumers, tens of millions of merchants, and extensive global processing rails. This two-sided network allows PayPal to make informed decisions that support continuous improvements to their products and solutions.
  •  Second, their machine learning analytics, delivers well-informed decisions in milliseconds.
  • Third, consumer trust in the PayPal brand around the world helps merchants acquire new customers and can reduce the percentage of customers that abandon purchases. The results of these three differences are real, quantifiable and desirable in a payments partner.

Download Mercator's paper on payment optimizations.

Mercator Advisory Group Executive Brief for PayPal Dec 2020 (PDF)

Mercator Advisory Group Executive Brief for PayPal Dec 2020 (PDF)

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