If extracted effectively and used properly, payment data hold immense value, allowing businesses to make smarter decisions to optimize authorization rates and increase revenue, according to a whitepaper by payment fintech Checkout.com.

The paper, titled Optimizing authorization rates with access to meaningful payments data, looks at two critical payment metrics online businesses should pay attention to, delves into how businesses can improve these metrics, and provides expert advice to help online merchants boost their payment performance.

Two critical payment metrics for online commerce

To improve payment performance, online businesses must have access and analyze two critical data points, the paper says. The first is the authorization rate, which corresponds to the percentage of transactions that merchants submit and that are accepted by the cardholders’ banks.

The authorization rate shows how many payments are authorized successfully once payment is initiated at the checkout, and also provides an indication of the experience a customer is having. For example, a surprisingly low authorization rate may indicate that legitimate customers are having payments wrongly rejected, a concept referred to as a false decline, the paper notes.

Estimates by Checkout.com and Oxford Economics suggest that businesses lose over US$20 billion a year due to false declines and nearly US$13 billion is handed to competitors at the final hurdle.Another study found that false declines leave customers very frustrated, with 44% of shoppers having been falsely declined either stopping or reducing shopping with a particular retailer.

Undeniably, the authorization rate is a good metric to gauge performance holistically, but on its own, it’s not enough for spotting trends and patterns that can drive actionable performance improvements, the paper says.

For that, businesses must go more granular and begin to look at the authorization rate broken down by country, card, payments provider, transaction amount and so forth, and then go even deeper by combining these different parameters, it says. This way, businesses will truly be able to see where payments are failing and focus on optimizing these specific areas.

The second critical data point, according to the paper, is the response codes. Response codes are generated every time a transaction is approved or rejected by an issuing bank, and tell businesses why.

Response codes are powerful data points, yet, many businesses have either no way to access them, or are just handed basic consolidated data sets.

Checkout.com research found that 65% of businesses don’t receive detailed raw response codes on failed payments. This ranges from them receiving no response codes at all, to grouped response codes that only provide a generic overview of why payments have failed.

“This often leads businesses to make mistakes such as failing to retry the payment quickly enough or retrying too often and creating additional issues and costs,” the paper says. “It also prevents businesses from developing proactive strategies that stop the payment from failing in the first place.”

Untapped opportunities

Despite the power of payment data, most businesses are oblivious to what really happens after their customers press pay. They might see that the payment was approved or that it failed, but they have no idea why. Oftentimes, the problem here lies in the fact that their payment providers are simply not equipped to give their customers access to that data.

Online businesses should look for payment providers that give merchants a granular view into their payments data, recommends Checkout.com. This way, they will be able to quickly understand why transactions succeed or fail and take proactive steps to improve their performance.

Undeniably, the quality of the data businesses receive from their providers is critical, but they must also consider how they access it and favor solutions that will integrate seamlessly with their internal systems.Checkout.com data show that only a few businesses actually receive data in a way that’s meaningful to them with 60% of surveyed businesses stating they don’t feel that their payment data are informing strategy or innovation, and 41% sharing that they just do not receive any actionable analytics with their payment data at all.

The release of the Checkout.com guide comes on the back of booming digital commerce activity amid COVID-19 and newfound online habits.

According to the e-Conomy SEA 2020 report by Google, Temasek and Bain & Company, e-commerce gross merchandise volume (GMV) in Southeast Asia jumped 63% between 2019 and 2020 to US$62 billion. Over a third of 2020’s online commerce was generated by new shoppers, of which 8 in 10 intend to continue buying online going forward.

GMV is projected to surge 23% between 2020 and 2025 in Southeast Asia to US$172 billion.

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