According to the results of research carried out in collaboration between Oxford Economics and Checkout.comcompanies are You lose between 1.5% and 2.2% of your income due to a suboptimal payment acceptance process. In 2022, a company making $1 billion annually could have lost up to $22 million from false rejections alone. For large companies with revenues of $100 billion, the magnitude is even more dramatic, with losses of up to $2.2 billion.
As consumers increasingly take advantage of the benefits of online shopping, We are seeing an exaggerated increase in false rejections; This increase is causing companies to miss a golden opportunity to increase their revenue. Today, a single false rejection can cause customers to abandon an e-commerce, resulting in significant loss of loyalty and sales. These negative impacts are felt in all sectors, from small businesses to large corporations.
Innovative chief financial officers (CFOs) are discovering the benefits of using payments as a strategic tool, especially in today’s difficult economic climate. By optimizing their payments, these companies not only overcome very difficult times, but also gain a great competitive advantage.
The Proliferation of False Rejections and the Rise of the Intelligent Consumer
If by accident Decline a trusted payment methodfalse rejection occurs and increasingly this situation are becoming a serious problem for online businesses. Our research shows a trend that is very alarming; 45% of consumers won’t try again after a false rejectionand decide to transfer their purchase request to the competitor’s online shop. As a result, after working hard to attract customers, companies lose trusted consumers, their Costs have increased by up to 220% in the last decade.
Compared to three years ago, the amount of money lost to competing e-commerce companies from a single false rejection in the US has increased by up to 300%. This figure equates to $35 billion going directly into the pockets of competing websites or applications a total of $50.7 billion lost due to false rejections.
Rami Josef, product director of payment performance and authentication at Checkout.compoints out that the sheer speed and scale of the expansion of commerce and online payment processes has created a situation of great complexity. This scenario is exacerbated by elements such as the increase in cross-border purchases and the different rules of systems and issuers. The greater the complexity, the greater the chance of finding errors in payments that lead to false rejections.
But there is a chance to reduce this very complex situation. By using the right technology and increasing transparency into payment processes, companies can identify and resolve issues that lead to false declines, thereby optimizing their revenue. To achieve this, companies must quickly adapt every step of the process and adapt to changes as challenges evolve.
High performance compensation is the CFO’s competitive incentive
The complexity of the ecosystem is inevitable, but suboptimal payments don’t have to be the case.
Our research shows that there are More and more chief financial officers (CFOs) and their teams are recognizing the strategic potential of paymentsand its influence on sales growth. They are now keen to improve their payout performance, not only to offset losses but also to benefit from an increase in profitability. These companies recognize that there is a huge opportunity in optimizing payment performance, and other merchants should emulate them.
However, taking advantage of this opportunity requires a mindset shift. Payments are traditionally considered a cost center, but If addressed correctly, they can become an engine for increasing income. To achieve higher payment performance, every phase of the process must be optimized. For example, implementing a proper APM solution, having access to local acquiring banks, and proactively responding to SCA and network token requirements can result in lower costs, fewer frauds and false declines, and a significant increase in satisfied customers.
And when these optimizations are done successfully, each transaction will do much more, resulting in a significant increase in sales. Payment performance must be aligned with business strategy to avoid unnecessary loss of sales and win back lost business from competitors.
Conquering Powerful Payments
The ultimate goal is to close the gap between strategy and payment performance. To do this, you need to understand the size of the revenue opportunity associated with optimized adoption rates, be aware of how much you are losing to competitors with higher adoption rates, and monitor these metrics over time.
The potential for companies to transform their payments performance and significantly increase their results is of great value. As the online payments landscape continues to evolve, those who recognize the strategic potential of payments will be well-positioned to capitalize on these opportunities and gain a competitive advantage.
60% of CFOs view upcoming payments regulation as one of their biggest threats68% are concerned about improving their payment acceptance rates and 51% are concerned about how trends in a negative macroeconomic environment could impact their business operations. An interesting fact is that 67% of Chief Payment Officers have the board’s support regarding the strategic importance of payments.
In the context of the current market, which is characterized by its high competitiveness with very low margins, the great strategic potential of payment transactions cannot be overlooked.
To learn more about how false rejections can impact your profit margins, we invite you to download our latest white paper, produced in collaboration with Oxford Economics. Data gathered from surveys of more than 1,500 mid- and large-sized businesses and 8,000 consumers shed light on the underlying dynamics behind the costly rise in false denials.