What is payment optimization & why do merchants need it?

In the ever-evolving landscape of e-commerce, payment optimization has emerged as a critical component for merchants seeking to enhance their profitability.

This is exemplified by the staggering financial impact of payment failures, resulting in substantial revenue losses. “Around $800 billion is lost due to payment failure" for various reasons including 3DS failures, fraud prevention measures, technical issues with payment stack, expired cards and so on.

Additionally, the lack of visibility into the health of payment systems and the detrimental effects of not having real-time insights on the authorization rate further underscore the significance of this process.

In this blog, we will delve into the concept of payment optimization, explore its key components, and understand how Inai, a payment optimization tool, helps merchants enhance their revenue, reduce fraud, and optimize costs.

What is Payment Optimization?

Payment optimization is the strategic process of improving various aspects of payment processing to enhance authorization rates, reduce fraud, and minimize costs. This multifaceted approach involves several key components:

• Improve Authorization Rate

To improve authorization rates, merchants need to offer preferred payment methods in different regions, ensuring the highest success rates for their target audience. Additionally, selecting payment vendors with high uptime and minimal downtime is essential for maintaining a consistent transaction flow.

• Optimize for 3DS Authentication

In regions like Europe, 3D Secure (3DS) authentication is a crucial component of payment processing. Payment optimization involves optimizing the 3DS process to ensure smoother and more successful transactions while adhering to security standards.

• Fraud Reduction

Payment optimization also places significant emphasis on reducing fraud. By implementing robust fraud prevention measures, merchants can minimize unauthorized transactions and the associated chargeback costs.

• Cost Optimization

Reducing operational costs is a significant part of payment optimization. Merchants must select payment vendors and processors that offer cost-efficient solutions while maintaining high-quality service.

How Does Inai Help with Payment Optimization?

Inai, a comprehensive payment optimization solution, offers a wide range of features that assist merchants in enhancing their revenue, reducing fraud, and optimizing costs.

Let's explore how Inai can assist merchants in achieving their payment optimization goals:

• Enhanced Revenue with Improved Authorization Rates

Inai provides real-time insights into authorization rates at the order level. Merchants can track order level auth rates, build funnels to get insights on auth rates across retries and get actionable insights to identify and rectify issues promptly. This granular data ensures that no revenue potential is left untapped.

• Improved 3DS Authentication

Inai offers detailed overview insights into 3DS transactions which includes your total card transactions segregated based on:

1. Transaction Flow

Visualize transaction failures throughout the 3DS transaction phase.

• Attempts based on 3DS and Non 3DS Transactions
• Authentication based on 3DS Versions, & Platform
• Authorization Transactions based on Authorized, MIT and CIT Authenticated Transactions and Declined Transactions by Card Issuers, & Issuer Bank.
  
  

2. Flow Comparison

Get an overview of 3DS transaction outcomes (attempted, authenticated and authorized transactions) as well as the comparative effects of frictionless and challenge flow on those 3DS transaction outcomes.

3. SCA Exemption

Analyze the distribution of Strong Customer Authentication Exemptions based on:

• Low-Value Payment
• Low-Risk Payment
• Trusted Beneficiaries Payment
• Secure Corporate Payment
  

4. 3DS Failure Analysis and Error Reason Breakdown

Analyze a comprehensive breakdown of authentication failures and transaction decline reasons, by thorough examination with a focus on identifying specific issuers or problematic cards that may be contributing to these errors.

5. 3DS Across Different Versions

You can evaluate 3DS across various versions, it's essential to identify opportunities for improvement that revolve around user experience, security fortification, compliance with evolving regulations, and expanding its reach across various regions and payment processors.

6. Variations between Apps and Browsers

You can recognize 3DS experience and specific issues on website and app flow, and tailor your 3DS implementation to address platform-specific challenges, ensuring a seamless user experience while also resolving any issues specific to the web or app flow.

This level of granularity is invaluable for understanding and improving your 3DS authentication rates.

• Immediate and Effective Alerting

Inai offers personalized alerts, ensuring that you are promptly informed about the status of your payments. There are three types of alerts supported by inai:

• Threshold-based: alerts that are triggered when a metric breaches a threshold, which is useful when there is a continuous stream of data. This can also be used In cases where the metric is a sporadic event where the metric can take a value from a pre-defined list.
• Variance-based: alerts that are triggered when a metric changes over a period of time by a user-defined threshold. This is useful for issuing change alerts, i.e. when the difference between the metric now and a past period of time exceeds a certain threshold.
• Range-based: alerts that are triggered when a metric breaches a pre-defined range over a period of time by a user-defined threshold. This is useful for detecting anomalies for instance a metric is usually in the 75-85% value range. Any deviation from this is an anomaly and needs to be alerted.

All of the above alerts can be used to handle metrics that are computed from a continuous stream of data or from a discrete set of values.

Here’s how you can configure it through the Inai dashboard:

• Low Success Rate Alert: This helps you keep track of when your success rates dip below your predefined standards. you will receive an alert on your Slack or, your email, when your success rate falls below a specified percentage, based on a minimum number of transactions within a defined time frame.
  
  
  
  
• High Pending Rate Alert: Ideal for monitoring the accumulation of pending transactions and their progress toward a terminal state. You will receive an alert on your slack or, your email when your pending transaction rate falls below a designated percentage, based on a minimum number of transactions within a specific time frame.
  
  

You can also customize it as per the parameters of your requirements based on the minimum transaction count, time window, evaluation delay time, time zone and so on.

Your customer success manager will activate Slack notifications by default, ensuring you receive real-time alerts on your payment Slack channel.

4. Cost Reduction and Efficiency

Inai provides granular fee insights to merchants, helping them understand the various fees they pay to their payment vendors.

You can get a breakdown across the scheme, markup, interchange, and processor fees. This enables you to identify outliers in the fees you might be paying and consolidate your reporting across additional fee components like chargeback fees and excess retry fees that are typically sent only monthly via PDF.

It's not uncommon for the same card to incur differential interchange fees/scheme fees depending on the processor. We will shortly launch features to identify these and benchmark the interchange and scheme fees. Look Out 👀

5. Actionable Insights

Our platform analyzes merchant’s payment data across 100+ dimensions (including brand, scheme, issuer, time, processor etc) and leverages machine learning models trained on billions of data points.

Our machine learning-based recommenders are able to unearth anomalies in your payment data and able to surface recommendations to help fix revenue leaks in your payment stack.

You can also leverage our Gen AI chatbot to display insights/ data visualizations using natural language. For e.g.: "Show me the authorization rate on Visa cards in the UK and show a comparison against Stripe and Adyen."

Conclusion

In a challenging macro environment, merchants need to prioritize adding to their revenue by reducing payment failures and lowering the costs of accepting payments. Payment optimization tools such as inai Optimize empower merchants to improve their authorization rates, increase 3ds authentication and optimize costs effectively.

Ready to take control of your payment processes and boost your success rates?