Trends In Payment Authorisation – What To Look Out For
Over the last few years merchants and Payment Service Providers (PSP) have endeavoured to create a frictionless online payment experience for customers, increasing conversion and reducing abandoned carts.
The mantra is to provide consumers with choice and convenience. Choice in the number of options they have to make a purchase online, on any device and with multiple payment options so they can choose their preferred method. Convenience in the form of a fast and intuitive payment journey, that minimises the number of steps required to make an online payment.
Tools and payment solutions such as automatic form filling, alternative payment methods, one click, guest logins, tokenisation and positive profiling, have all helped to create a more streamlined and friction free payment experience.
Merchants who deploy these and other solutions see a positive impact on conversion rates. Job done, or is it?
Some experts in the payment sphere suggest that a frictionless payment journey can have a negative impact further down the line: In the form of chargebacks.
Frictionless Payments And Chargebacks
James McDonald, Barclaycard’s Head of Strategic Initiatives and Innovation, says in an article on the future of payments: “As things become more frictionless, it’s going to be very easy for people to consume and spend.” As a result consumers may not really register that they have initiated a transaction, and may be surprised when their credit card statement records activity. James says: “You’ll have less friction at the point of interaction, but more responsibility to inform consumers how they are spending.”
Chargebacks are a challenge for all merchants, especially those that are not selling tangible goods. Whether it is payment for a digital subscription, services or the purchase of online tokens or credits, there is a risk of chargebacks.
Not all chargebacks are a result of fraudulent behaviour. Consumers can forget that a purchase was made especially if they have nothing tangible to show for it, and a frictionless payment journey could be partly responsible.
The legitimacy of a chargeback – whether it is the consumers’ error or not – is immaterial. Chargebacks rates have a negative impact on your business, costing in administrative fees and, if the chargeback is upheld, refund costs. High chargeback rates can also limit your ability to take online payments if merchant services are withdrawn.
The onus is on the merchant to protect their business from fraudulent and erroneous chargebacks. Your PSP should also be able to advise your business on best practices and solutions that can help reduce chargeback rates. Fraud prevention tools will help protect your business from fraudulent chargebacks, but there are other solutions that can protect from customer mistakes.
Naturally, no one wants to add any additional layers to the payment process to ensure consumers are sure they want to spend money. With average cart abandon rates still high, the frictionless payment experience is sacrosanct. However, there may be opportunities after a transaction is complete to reduce the chances of an erroneous chargeback. We recommend the following:
Merchant descriptor – the business / organisation name that appears on credit card or bank statements should not sound alarm bells with consumers. However, if a group or legal name is used instead of the brand name used on the website, consumers may think that the transaction is fraudulent and initiate a chargeback. If the brand name cannot be used, alternatively use the website URL as the credit card descriptor.
Email communications – after a transaction there are several opportunities to follow up using email to ensure consumers have a reminder of their purchase. Confirmation that an order has been received and dispatched is standard practice, but further communications can also serve as a reminder. Requests for feedback or a special offer as a ‘thank you for your recent purchase’ can not only reduce chargebacks but also help with customer loyalty and retention strategies.
Remind customers about recurring payments – regular payments for services or goods, such as subscriptions and monthly bills, are easy to set up online but just as easy to forget. Send reminders that a payment is due to be taken to ensure that funds are available and that the customer is aware of the approaching payment.
A frictionless payment experience is still the goal for merchants and PSPs, but once you have got a sale you need to hang on to it. The suggestions above can help reduce chargebacks and also have the potential to build customer relationships, trust and loyalty.
For more on protecting your business from chargebacks download our whitepaper on Fraud Solutions For Ecommerce Businesses here.