E-commerce experts say these 4 checkout mistakes may hurt your business' bottom line
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- Enterprise businesses today are focused on providing exceptional consumer-facing experiences.
- But many customers still witness challenges during and after checkout, including false declines and fraud.
- To overcome these reputation-damaging hurdles, business leaders must invest in improving the backend processes behind the checkout.
Enterprises today are navigating seemingly different priorities: Many are investing in the front-end checkout experience, developing interfaces that are exciting and interesting for users. But by prioritizing front-end operations, backend optimizations that improve what customers don't see (but care about), have become an afterthought. However, while these priorities seem to be at odds with one another, they're actually more similar than different: Enterprise leaders often forget that the backend creates a seamless checkout experience and, in turn, a loyal customer.
It's somewhat of a catch-22: By only prioritizing the front-end, brands forget to focus on the backend and this actually makes it more difficult for customers to complete a purchase. Perhaps they're losing customers to an error-prone or repetitive checkout process. Maybe they're forgoing potential sales by failing to ensure shopper data protection. These oversights aren't just costing brands revenue; in some cases, they're impacting a merchant's reputation.
Instead of waiting to see these situations play out, brands must proactively invest in resources to improve the processes behind the checkout. And at a time when many shoppers are limiting their spending due to economic instability, businesses face even greater hurdles to capturing and maintaining their attention.
Below are four common checkout mistakes that enterprise e-commerce businesses make and how to avoid them.
Mistake #1: Not using vaulting and tokenization to protect sensitive customer data
Consumers today provide businesses with more data than they can keep track of, and they trust brands to guard it closely. Failure to keep consumer data safe can cost a brand millions of dollars, and sometimes their reputation. In today's digital economy, data breaches have become more common. Half of executives expect the number and size of cyber events targeting financial data to increase in the year ahead.1
Enterprises can help ease these concerns by securely storing shoppers' card information in a protected digital "vault." This vault helps make it safe for a business to store payment details for future transactions and may help grow revenue through features like one-click checkouts and subscriptions.
To further help protect a customer's data, businesses can leverage network tokenization where a customer's sensitive payment information is replaced with a token at checkout. The token is merchant-specific and carries a one-time-use cryptogram, making it useless to potential fraudsters if it becomes compromised. Tokenization can also help reduce false declines. Using network tokenization in your enterprise payment system can help reduce the risk of mismatched or inaccurate data and decreases the likelihood that a valid transaction would get incorrectly flagged as fraud.
Mistake #2: Overlooking the impact of false declines and neglecting backend payment technology
When a buyer encounters a false decline, they often abandon the purchase. E-commerce merchants lost an estimated $11.1 billion in false declines last year.2 On the business' end, that means finding the right balance of security and payment approvals to prevent unnecessarily low authorization rates. When businesses use security software that doesn't integrate with their payments ecosystem, they often need to set their own fraud thresholds. If those thresholds are too conservative, they can lead to false declines; if they're too liberal, they become more vulnerable to fraud.
E-commerce merchants lost an estimated $11.1 billion in false declines last year.
Backend payment technology can help keep authorization rates in check. Predictive analytics solutions use AI to assess each transaction's risk level. The machine learning models can distinguish between legitimate and fraudulent transactions to reduce false declines. But machine learning is only as effective as the information that it is trained on, so make sure your solution is pulling from a dynamic dataset.
Naked Wines is one brand that leveraged backend payment tech to address false declines. After implementing PayPal Braintree and Fraud Protection Advanced, the wine retailer saw a 5% increase in approvals. And PayPal Braintree has shown an increase in authorization rates by around four percentage points globally.3
"Fraud Protection Advanced runs every transaction and all of the shopper's known data," said Cindy Turner, vice president, PayPal Braintree, Risk as a Service and Payouts at PayPal. "It evaluates geography, prior transaction history, device data, and more. An AI model then assesses whether the buyer and transaction are real, giving merchants more control over fraud reduction."
Mistake #3: Believing your company is immune to fraud
The current climate has presented enterprise merchants with another challenge beyond just finances: Economic uncertainty breeds more fraudulent activity.4
The good news is most businesses are talking about ways to combat fraud. And many e-commerce merchants are investing in technology to protect against threats.
"Payment tools help drive good customers to merchants and make it easy to make purchases," Turner said. "But these solutions also work on the opposite end — helping to prevent fraudulent transactions from the get-go."
Mistake #4: Failure to mitigate costly chargebacks
Many enterprises continue to face challenges even after the checkout is complete.
A chargeback, for example, is one hurdle companies often face after a sale. Chargebacks not only result in the loss of a potential customer, but they're expensive: Merchants pay robust chargeback fees and incur other operating costs. One report found that global businesses pay approximately $3.75 for every $1.00 in chargebacks.5
Chargeback protection software can screen for fraudulent charges on incoming transactions while protecting companies against financial loss on eligible disputes.
PayPal Braintree6, for example, protects companies from eligible fraudulent chargebacks by tracking and storing purchasing data and helping gather transaction information.7 "With these stored data elements, businesses can verify whether or not a customer requesting a chargeback actually made the transaction," Turner said.
So whether protecting customer data or reducing the potential for fraud, optimizing tools and strategies behind the checkout will help your business improve the purchasing experience and, in turn, drive successful business outcomes. When done effectively, backend and front-end processes should complement — not cancel out — one another.
Learn more about how PayPal can help perfect the backend processes behind the checkout.
This post was created by Insider Studios with PayPal.
[The content of this article/blog is for informational purposes only and PayPal is not responsible for third party content. You should always obtain independent tax, financial, and legal advice before making any business decisions.]
4 "Global Insights Report." Experian, September 2022.
5 "The True Cost of Fraud." LexisNexis.
6 PayPal Braintree has shown a reduction in chargeback rates by 5 bps globally. (Major global payments network data and PayPal internal data analysis from transactions over a 12-month period from Q4 2020-Q3 2021 in 8 markets (US, UK, DE, AU, FR, IT, ES, CA) across 12 verticals. Does not include transactions from domestic schemes (e.g. Cartes Bancaires, EFTPOS). *Composite results weighted across countries (excl. CA) based on size of 2021 digital commerce markets, sourced by Euromonitor)
7 Terms and conditions apply. Exclusions apply to ineligible items.