Accepting online payments is no longer optional but a necessity for all businesses across every industry. From e-commerce giants to emerging startups, companies worldwide embrace digital payments to keep up with the ever-growing demand for a convenient and seamless checkout experience. With the e-commerce industry anticipated to see substantial growth, increasing from a projected volume of $4.11 trillion in 2023 to a remarkable $6.35 trillion by 2027, it's clear that this growth is not slowing down anytime soon.
As the preference for online payments grows, the need for effective and accurate payment management practices becomes increasingly important. One of the main challenges in achieving this is minimizing the impact of human error. When dealing with critical financial inflows and outflows, human mistakes can lead to significant consequences that can impact businesses in various ways. These may include financial losses due to incorrect charges, payment processing issues, or failed transactions, which can adversely affect both businesses and their customers.
In this whitepaper, our goal is to offer an excellent opportunity for payment industry professionals to learn from each other's experiences by investigating five of the biggest oversights made by some of the most seasoned payment experts, each responsible for overseeing millions of transactions for their businesses. Each interview will focus on three key questions:
- What was their biggest mistake in managing online payments?
- What was the impact of the mistake on the business?
- What steps did they take to prevent this mistake from happening ever again?
Lack of robust fraud-prevention setup leading to a high number of incoming chargebacks
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Our first story highlights the Head of Product at a leading global EdTech company. Prior to his current role, he served as the Chief Product Officer for an e-commerce company dedicated to improving the accessibility of online and cash payments throughout Latin America.
What was your biggest mistake in handling online payments?
“Our biggest mistake was not realizing the significant impact chargebacks could have on our business. Initially, we didn't view them as a significant concern and assumed they were just a normal part of doing business. However, as our customer base grew, and during significant events and campaigns, we experienced unexpected spikes in chargebacks, which began to take a toll on our finances and our client's businesses.”
What was the impact of the mistake on the business or customer?
“The impact was significant for both our business and our customers. These spikes in chargebacks caused delays and frustration for our customers. Some users even stopped using our service altogether. We quickly realized the severity of the problem and the impact it was having on our business and customers and knew we needed to address the issue urgently. However, we didn't have a clear plan in place to handle chargebacks and lacked the necessary resources to investigate and dispute them effectively.”
What steps did you take to prevent this mistake from happening ever again?
“We began by implementing better fraud detection measures and improving our customer service to address issues before they lead to chargebacks. We also established a clear process for handling chargebacks, which reduced our losses and improved our reputation among customers and issuers. To prevent similar mistakes in the future, we also partnered with our clients to define a plan and new processes to reduce the impact chargebacks had on their experience with our platform.”
Key takeaways from this story
The key takeaway from this story is the importance of having a robust fraud-prevention setup to detect and prevent fraudulent transactions, as well as the negative impact chargebacks can have on a business. Chargebacks occur when customers dispute a transaction, resulting in the reversal of the payment and a fee for the merchant. Excessive chargebacks can lead to financial losses, damaged reputation, and even the loss of the ability to process payments. Implementing fraud detection measures and having a clear process for handling chargebacks can significantly reduce their occurrence and protect the business from their negative effects.
The cost-cutting strategy backfires, resulting in a 10% revenue loss
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In our second story, we spotlight a Vice President at a popular ride-hailing company. With experience spanning both merchant and banking sectors, he currently handles payment volumes exceeding hundreds of millions of USD while overseeing the company's payment strategy and operations.
What was your biggest mistake in handling online payments?
“We were looking to cut costs and change our transaction routing while relying on a single partner. However, when it came to the realization of the product, the partner was very slow in making the necessary adjustments. Even pushing through the CEO didn't work, and we realized we couldn't meet the deadline with this partner because they hadn't developed anything. As the due date approached, we decided that we couldn't rely on them anymore and needed to develop the feature ourselves.”
What was the impact of the mistake on the business or customer?
“Although we successfully reduced costs, the payment conversion was a disaster. We experienced a negative growth of around 10% compared to our previous solution. We had hoped that by cutting costs, we could fuel our revenue and growth, but in reality, we sacrificed revenue by reducing the payment conversion on our payment page. After about a week, we discovered the problem and reverted to the previous version. It took us six more months to develop different scenarios for the payment page and backend to improve conversion rates.”
What steps did you take to prevent this mistake from happening ever again?
“To fix the issue, we implemented payment retries, optimized routing between debit and credit cards, added more information to the payment page flow, and incorporated many other features that could help us reach the numbers we saw before. Moving forward, we also do multiple A/B testing and collect customer feedback to track metrics such as bounce rate and conversion rate to prevent similar mistakes from happening again. In my experience, it's essential to invest in integrations and transaction routing early on, even if they aren't needed immediately.”
Key takeaways from this story
The key takeaway from this story is the importance of carefully evaluating cost-cutting strategies and their potential impact on overall business performance from various angles. In this case, the company's attempt to reduce costs by relying on a single partner backfired, resulting in a significant revenue loss. Consequently, it is highly beneficial to maintain multiple partnerships to be leveraged as fallback options or for disaster recovery. This approach not only safeguards against unforeseen challenges but also provides merchants with the flexibility and leverage to choose partners based on their payment success rates or cost-effectiveness. Furthermore, investing in a robust payment operating system and utilizing data-driven methods, such as A/B testing and gradual rollout, can help optimize payment processes and contribute to revenue growth while ensuring that cost-cutting measures don't compromise overall payment performance and customer experience.
Want to read the full story? Download our whitepaper about five costly mistakes made by payment experts in managing online payments and learn from their mistakes.
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