One of the most important, yet often overlooked aspects of online retail is collecting payments. Right now, highly optimized sites support more than 10 different currencies and over four different payment methods. Next year, e-Commerce volume is expected to be up 236% from the volume of 2012. With more and more global citizens shopping for goods and services online, the need to support more payment methods and currencies increases, leaving merchants with the responsibility to meet this growing demand.
To muddy the water a little more, there are more than 1,000 registered payment providers to choose from and 300+ different payment methods. Retailers must pick and choose specific regions to focus on and integrate their potential customers’ preferred currencies and payment methods by choosing the right payment provider for their specific situation. Crucial analytics come into play once payment providers are integrated, as retailers must focus on the ROI of each provider and payment method.
These complexities make payment management time consuming, isolated and error prone. Some retailers and merchants have the luxury of building in-house analytics and automation tools, which can end up costing millions of dollars, not to mention hundreds of hours spent on building, maintaining and updating systems thanks to the ever-changing nature of payments.
In order to take a turn toward automated, connected and accurate payments management, and ultimately retail optimization, the three pain points of time consuming tasks, isolated networks and error prone analytics have to be addressed in a way that promotes openness and transparency throughout payments operations, while reducing the lift from the merchant.
The problem: Payment management is more complicated than simply accepting payments, requiring merchants to pay attention to many factors including authorizations, cash flow, fees, chargebacks and reconciliation.
Every retailer’s payments team needs to reconcile their internal order or accounting system with their payment providers and banks to ensure all payments were received properly. Some retailers prefer to check in on this on a daily basis, while others make it a weekly or monthly cycle. Regardless of when retailers choose to reconcile their bank statement, they are required to pull dozens of reports from multiple providers each month. Depending on the size of the merchant, this can take up to two whole days... just to pull reports.
Once the reports are in, many payments teams take the data and add it to their own spreadsheets to match with their internal order data. For retailers processing even hundreds of transactions per day, this process is incredibly time intensive and requires meticulous work. Aside from reconciling transactions, payments managers are then required to break information down further into authorization details, fee rates, chargebacks and more, often resulting in over a week’s worth of work.
The solution: Time consuming processes call for automation. This would ideally be done on a platform that gathers all payments data in one place, but as an alternative, retailers can try to get IT resources dedicated to the aspects of payment management that are most important to them. Some teams pick and choose areas of payments, like authorizations, reconciliation, fees or chargebacks, and focus IT there to target the biggest problem areas.
Putting a focus on automating data aggregation allows more time for digging into the data. Some IT teams set up custom solutions that match aggregated data with internal order data, making the reconciliation process much quicker and more accurate. When it comes to analysis, any alerts that call out inconsistencies in performance can draw attention to problem areas based on typical performance, and streamline targeting and fixing issues.
The problem: Due to the demand to stay on top of customer-facing improvements in business, merchants often delegate less IT attention to payments teams and the financial organization, leaving them struggling in terms of customized and automated reporting. With the focus on manual operations, the priority on clean reconciliation, payments analytics and vendor performance has to take a back seat, and worse, with constantly changing rules and regulations in payments, it’s hard to even figure out how to get ahead of the curve and truly understand how the business is doing.
While looking at internal operations is imperative, comparing to outside businesses is also essential to pinpointing how operations can improve. A lack of an apples-to-apples view leaves businesses isolated when trying to decipher if something is normal for their business. For instance, one retailer noticed their decline rate was higher in Sweden than in other countries, but they had no idea if that was normal or if they should have been concerned, because they had no way to compare to other businesses.
The solution: It’s important for retailers to see the benefit in investing in payments management. Taking some time to manually track aspects of payments important to the business can create a good case for decision makers to delegate IT time to payments. For example, if a payments manager is able to show that authorizations are a consistent problem within a specific region or bank, and it’s affecting the bottom line of the company negatively, it will create a fantastic case study to advocate for setting up tools to target the problem and address it quickly and efficiently in the future.
On top of that, payments data within the business should be compared to outside retailer data. Analyzing outside data would allow retailers to compare their performance to like retailers and pinpoint areas for improvement, as well as measure their success against internal key performance indicators. Sharing retailer data would help raise the bar for each provider and set retailers and providers on a shared path to improvement and success.
The problem: Manually importing and analyzing thousands of transactions in spreadsheets lends itself to errors. On an obvious level, this leads to oversight in matching provider data with internal order data and with calculating and analyzing authorization rates, fees and chargebacks. Take that with one provider, then add several more providers to the mix and it becomes completely overwhelming to gather data accurately, not to mention compare performances of providers. Because of the effort needed, many merchants skip comparing their own providers, which can end up being a critical data point as it impacts successful sales.
The solution: Accurate data is the key to success in any payments operation. Reconciling monthly payments alone can take a week of work, and pinpointing problems is like finding a needle in a haystack. Systems that allow retailers to import provider data and automatically match it with internal order information can alert payments managers to inconsistencies between orders, and between what the retailer believes should be in the bank versus what’s actually in the bank.
Additionally, automatically comparing the performance of providers with precision can help retailers make informed decisions on intelligently routing transactions for higher approval rates, and ultimately on which providers to use for particular types of transactions. Retailers can utilize outside services or solutions that specialize in payment management, but IT teams can also build custom solutions or performance-indicating analyses that provide a comprehensive view of provider operations.
A whole view of payments operations has the ability to increase revenue and decrease costs, creating a positive impact on retailers’ bottom lines and overall successes. While little IT focus is dedicated to payments in many businesses, taking the time to make a case for investment in payment management can drastically improve the effectiveness of the payments team and offer more time for improving specific areas of the business. On top of pushing things forward internally, advocating for openness and transparency from providers has the ability to get retailers to a point of having quick and easy access to data that can intelligently shape their operations on a daily basis.
Jason Pavona is the Co-Founder and CEO of Pazien, the connected payment strategy solution that automatically gathers all of a merchant's payment data in one place and creates custom reports with no IT effort. His goal is to promote transparency and openness within payments in order to set merchants and providers on a shared path to payments success. Most recently he led Sales, Marketing & Product at Litle & Co, recognized as one of the most innovative companies in payments and the fastest growing company (Inc. Magazine #1) in the U.S. Previously, while at Lycos and Domania (now IAC), he created online and mobile consumer products with 20 million+ daily users.