Contemporary payment systems are now capable of running at lightning speed, however the process is only as fast as its slowest man. A lag in both system proportionality and customer data will slow down the execution of conversion rates; ultimately dragging the ability to sell such products down with it.
These thoughts are considered by David Lambert, who explores the requirement for balance within today’s payment systems and how that translates into a sales perspective.
Lambert is the co-founder and commercial director of Transact365, an emerging global fintech platform. A seasoned payments professional, he has worked with acquirers, payment service providers and payment facilitators both in a commercial and an advisory capacity. With a specialist focus on payments within the financial services sector, his mission statement for Transact365 is to bring all facets of the payments ecosystem into a robust and scalable multi regulated platform. Lambert’s expertise extends beyond online payments into challenger banks, cybersecurity and complex fraud management.
Boarding new merchants from a sales perspective is both an art and a science. The art of sales is a well-trodden field with numerous different approaches. We see it in every industry with experts imparting their advice on Youtube, reality television programmes and even in our everyday lives where we all try to employ our own techniques to get what we want.
Personality driven for sure, but the art of sales is fundamentally a face-off between what you want out of the deal, and what your prospect actually needs. However, whilst the art is key to opening the door, it is the science that will ultimately deliver the results. The science or the “precision of tech” is the key to unlocking conversions, reducing fraud, and complying with the ever-changing rules and regulations surrounding the industry.
If you consider what needs to happen for a successful authorisation in payments, it’s an astonishing process, performed at lightning speed with so many components to it. Merchants, payment gateways, acquirers, card schemes and issuers all need to be in harmony for a payment to be successful. Delving deeper into that, the card issuer is being pressured to make decisions around a transaction at near real-time, without delay. An issuer needs to know everything about the transaction in order to honour it. Is this really my customer? Has the customer inputted the card data correctly? What is my customer buying? Is the merchant they are spending money with legitimate and on an approved merchant category code? Does my customer have sufficient funds in his or her bank account? Is this an unusual transaction outside of the norm? Does the transaction value suggest something out of the ordinary? Has my customer performed a 3D secure validation of the transaction? Where is the merchant located? Why is my customer spending on a currency outside of GBP, when 99 per cent of the transactions are in home currency? That’s a lot to work out in a fraction of a second and if any of these (and many more) factors are not fulfilled, then perhaps best not to honour the transaction? In a world of heightened compliance, it is easier for the bank to say no. Unless we don’t give them a reason to do so…
All of these considerations need to be looked at when a merchant integrates to a payment gateway, or a payment gateway integrates with an acquirer. This is where the science begins to kick in. If the issuer is placing these sorts of demands on the payment service provider and merchant, then we need to ensure that we send as much data as possible to improve the conversion rates. What we have seen on many occasions over the years is that the famous error response code five or “Do Not Honour” leads to a simple response from IT teams. “Please have the cardholder contact their issuer. We can’t help from here.” This always seems like an easy way out and a reason to investigate further on the precision of tech. As highlighted above, if the issuer isn’t happy with any part of the data they receive, they are likely not to honour the transaction. Should we look within ourselves therefore to understand if a portion of declines can be prevented, simply by investigating how the transaction(s) are being passed?
The goal in all of this remains the same. Discard unwanted transactions before they even get to the acquirer or issuer, only allow transactions within the acquirers permitted framework, keep fraud levels low and ensure the conversion rate remains as high as possible. If we think in reverse, without 3D Secure or fraud rules or even CVV checks, then conversions are going to be high. And so are the fraud levels. Conversely, by implementing 3D Secure, Countless fraud tools and extensive field requirements, conversions might well be much lower with ultra-low fraud levels. The science and the precision of tech is therefore a balancing act, allowing the right transactions to pass whilst capturing the problematic ones before they get anywhere near the issuer.
Here at Transact365, we live by these philosophies, and it has yielded strong results. Today we process many millions of transactions at an overall conversion rate across multiple merchant category codes of 86 per cent before we factor in transactions that failed due to non-sufficient funds. The fraud ratio stands at zero per cent and the chargeback ratio of 0.01 per cent.
These statistics come from all of the above, balancing fraud rules and expert knowledge around data fields. By combining the science and precision of tech with industry knowledge of why transactions fail is the main recipe for success. The sales job is as much a science as it is an art because the merchants always ask how the conversion rates look and more importantly how we can improve them. If we can comprehensively go to market knowing the intricacies of how to improve conversions, simply by implementing the right number but not excessive amounts of fraud rules and passing the correct data fields, whilst allowing 3D secure to do its job, then there is every chance conversion rates will improve.