As published on EssentialRetail July 8, 2020
During the Covid-19 pandemic, consumers are increasingly shopping online and, for many smaller, independent businesses who have previously relied on in-store sales for income, navigating a new digital landscape can prove difficult.
Over a third of SMEs have moved their operations online for the first time in April. In doing so, they are now competing against larger, more established businesses for the nation’s digital spend.
One of the biggest challenges in making the switch to eCommerce is getting set up and having the right tools and processes in place. From a payments perspective, this means having the optimum gateway and acquiring facilities and configuring them to maximise acceptance rates.
It’s important to think about what your attitude for risk is and develop a payments strategy to match. For example, depending on the value of the goods you’re selling, it’s important to have screening tools in place to protect your business from fraudulent transactions and data breaches.
For eCommerce, the level of risk that a merchant is exposed to can be significantly reduced by strong customer authentication (SCA). In practice, it means customers are not able to checkout online using just their credit or debit card details, but also provide an additional form of identification such as a PIN code, a fingerprint or a passcode sent to their mobile phone. This is known as two-factor authentication and is enabled through 3D Secure (3DS).
While that process can make online transactions more secure and protect online businesses, it can also introduce unnecessary friction into the customer journey and can adversely affect basket abandonment rates. That will be a concern for any small business owner.
Recent research shows that over three-quarters of small businesses say that future cash-flow is their number one concern. On that basis, every pound of income counts – both now and in the future.
Barclaycard Payments tips for SMEs to remove friction from the online checkout process
1. Choose the right payment gateway for your business
Different gateways will offer different capabilities and versions of 3D Secure. The new, upgraded version of 3DS (3DS Version 2) offers some significant improvements and benefits to businesses and consumers. If you’re a consumer, it’s much easier to use if you’re shopping through a mobile device, such as a phone app or tablet. If you are a business, it helps to limit friction and potential customer drop-out rate, meaning fewer consumers abandon their online baskets and more go through to complete the payment process.
2. Take advantage of SCA approved exemptions
Research from Ravelin suggests that actively authenticated (3DS) transactions can take up to an additional 37 seconds – a significant delay for shoppers who are used to one-click or contactless payments.
Automatically routing all transactions through 3DS could have a negative impact on customer satisfaction and may result in fewer purchases. So, our advice to is to use 3DS selectively for those transactions which carry a higher risk.
Businesses need a clear strategy, taking advantage of SCA-approved ‘exemptions’ to balance fraud protection against customer experience and ultimately the rate of transaction success you wish to achieve. As part of that, you need to be clear on which exemptions you wish to use, and work with acquirer and gateway partners to deliver them.
3. Flag transactions correctly
A lot of online businesses can mix up how they ‘flag’ their transactions. Different terminology is used – including wording such as ‘recurring’, ‘card-on-file’ and ‘merchant-initiated’ – and inconsistencies can mean that some payments are declined. When operating a new business online, you should work with acquiring and payments gateway partners to ensure that transactions are flagged correctly and, in the process, to increase the rate of payments that get accepted.
4. Know your customers and the payment type they prefer
Consumers now have lots of different payment methods to choose from, from more ‘traditional’ card schemes such as Visa to digital and mobile wallets like PayPal, Apple Pay and Google Pay. This extends to payment methods such as Alipay and WeChat Pay that are popular in other parts of the world. It’s vital, therefore, to understand your customer base and accommodate transactions for the most popular payment types. Some will carry more risk than others and again, it is crucial to work in partnership with acquirers and payment gateways to mitigate against any security concerns.
5. Use data analytics
Another big reason for transaction declines is unavailable funds. There will be specific, regular times in the day that funds (such as a regular payment from an employer) clear into customer bank accounts. Data analytics can help you find out the optimum time to process transaction batches and achieve a higher percentage of those transactions being approved by card issuers.
To help both businesses navigate this complex payment landscape, Barclaycard launched Transact, a suite of tools designed to reduce fraud, improve payment acceptance rates, and intelligently apply SCA exemptions to reduce friction for shoppers. We’ve also partnered with award-winning AI-driven fraud prevention solution, Kount, to develop Transact’s state-of-the-art fraud protection module.
Whatever the size of your business, the commercial case for streamlining the online payments process is clear, but it’s particularly true for small businesses who are venturing online for the first time. Work with your acquirer and payments gateway to reduce friction, reduce fraud, increase payments acceptance, and ultimately drive up your sales. When the world is increasingly searching for products and shopping online, the reward for getting the payments process right is substantial.