James Diaz, director of payments at global payment technology company, BlueSnap, spoke to Payment Expert about how firms can maximize their conversion rate and the importance of strong approval rating. 

Payment Expert: In terms of digital payments, how integral is it that firms pay heightened attention to their approval rating? 

James Diaz: It is paramount that approval rates be monitored for businesses taking digital payments. And not just when they are launched because circumstances can change, e.g. due to variations in cardholder demographics, or temporary technical issues that may arise when the payment is being processed in the background. 

With digital payments, particularly in industries that have competitors only a mouse-click away, there is a higher risk of customers leaving if there is a problem on the first try. So, remaining vigilant and consistently aiming for a steady high approval rate is important.

Businesses may be missing out on anywhere up to an additional 30% of revenue due to poor conversion rates, which shows how crucial they can be to your bottom line. And a declined payment is a poor customer experience, whether the fault lies with the purchaser or the vendor. If an individual were to have a three in ten chance that their payment, and therefore purchase, was going to be declined, it may be that customers are lost faster than they are won.

PE: How will firms be able to define a good approval rating and what they are at? 

JD: One of the simplest ways is to request benchmarks for your industry from your payment solution provider. Ideally, you have a knowledgeable and engaged payments partner that can do a comprehensive analysis of your company’s transaction data, to identify potential missteps or ways to optimise, both before and after going live with them. This way, you can aim for not just good, but the best possible approval rate for your business.

In order to define what a good approval rating looks like, firms should first consider why a payment might be declined. Incorrect or outdated forms of payment information (such as cards or account number), a lack of the necessary funds, poor or no network availability, fraud and risk mitigation tools of card network, merchant or card issuer, or an unspecified ‘do not honour’ decline by the issuer, are all reasons for a decline.

As some examples, a B2B-focused software-as-a-service company would expect to see an approval rate of around 80%, while a business services firm would expect closer to 90% approval. From the payment solution used to the localisation of currency and business logic, there are a number of areas that can be addressed – fix them, and that SaaS company could improve its approvals by 15%, while the business service company could add another eight percent to its approvals.

PE: Can you detail some of the obvious errors that firms embark on when setting up digital payments? 

JD: Most companies—perhaps after attending a conference or reading an article—eventually become aware of untapped potential of digital payments after already getting set up. Ways to slash payment costs or substantially boost digital sales via local acquiring, local payment types and currency, dunning, and failover come to mind. 

After a little maths, realising that potential often becomes a top priority for the business. But unlocking it involves a cross-functional effort spanning many months or worse: new vendor selection processes and negotiations, diverting product and engineering resources to integrate with one or several additional processors, developing in-house payments expertise, etc. Instead, from the start, you can simply integrate with an all-in-one payment solution that has all this already built-in, which consistently adds new functionality and connectivity, and which keeps you in the loop, so you can avoid the heavy lifting.

PE: How much do you believe that the importance of digital payments has grown throughout the pandemic?

JD: In one word; incredibly. Businesses have gone cashless and contactless in droves – Visa reports that 75% of in-store payments are now contactless in Europe. Restaurants were some of the businesses to first make this move so that they could navigate lockdowns and launch online ordering and delivery systems rapidly. Now, every industry seems to be embracing this transition, and even B2B firms are rolling out digital payments alongside accounts receivable (AR) automation tools to get paid efficiently and simplify reconciliation. COVID-19 made the case for digital B2B payments, and they will be the norm even after the pandemic. Why undo systems that work better for everyone?

PE: If you had to offer key advice on how to set up digital payments, what would it be?

JD: The key point for businesses to consider when setting up digital payments is to choose a payment service provider (PSP) that is suited to their specific payment needs and those of their customers. One size does not fit all and it’s important to take both a business-model focused and a customer-centric approach to this.

It’s also important to look for a PSP that has existing integrations with the third-party providers that you are already using, such as shopping carts or accounting systems. This way, you can get up and running as smoothly as possible and ultimately means that you will reduce manual intervention when reconciling payment and customer data in your back-office systems. 

Whilst it sounds like a daunting task to identify and evaluate your requirements against the many PSPs out there, it’s actually really easy to find a provider that suits you. They should all have information online on their key functions, partners and integrations which you can use to identify what will work best for your individual business.