13 payment analytics tricks to outsmart a challenging economy

In today's demanding and ever-changing economic landscape, businesses need every possible edge.

Enter payments, a function that in many businesses is an enormous untapped area of potential.

Continue reading to learn more about the power of payment analytics, and get insight on how payments significantly influence your business's performance. You'll also learn how you can start recovering more revenue, better grasp customer behavior, fine-tune business operations, and make bold decisions while tackling hurdles like cash flow management and fraud.

What is payment analytics?

Payment analytics describes the process of collecting, standardizing, and analyzing your payment data. This data provides rich, actionable insights into your payment performance, operational efficiency, and, as a result, revenue.

You can identify patterns, trends, and correlations by thoroughly examining payment data. These findings inform strategic decision-making and aid in operational optimization. For instance, it helps in understanding the efficiency of processors, streamlining payment procedures, and detecting potential fraud risks.

In short: using payment data to analyze performance and optimize processing can facilitate growth and revenue gains, even in challenging economic conditions.

13 ways to utilize payment analytics to boost business performance

How can you use the power of payment insights? Here are 13 key benefits accompanied by real-world examples:

1. Offer the right payment methods

Providing an invaluable resource for businesses, payment insights tools can deliver data that helps decipher consumer behavior. For instance, by running A/B tests on the checkout, you can uncover the payment methods your customers prefer to use in various markets. This will ensure you minimize cart abandonment and increase customer satisfaction by offering the relevant alternative payment methods to every customer, every time.

2. Improve authorization rates

Payment analytics offer real-time insights into vital metrics' performance, such as your payment processor's authorization rates. This metric directly impacts revenue, making even marginal gains significant for your bottom line and ensuring a seamless checkout experience for customers. Additionally, improved authorization rates can minimize manual interventions during checkout and reduce customer service costs.

However, you must take care when optimizing your authorization rates. Lucas Quinio, Head of Payments at Conforama, advises against a one-size-fits-all approach. Instead, he suggests a nuanced perspective, considering various factors like performance, cost, and risk to establish tailored benchmarks aligned with your specific needs.

Look at the blog to learn why it pays to take a nuanced approach to authorization rate optimization.  

3. Reduce disputes and the costs of chargebacks

Disputes create substantial additional costs. These include:

1. Inventory loss: Shipped goods might not be returned, resulting in inventory loss.
2. Loss of original transaction amount: In cases where the merchant doesn't win the dispute.
3. Chargeback/dispute fees: Regardless of the dispute outcome, merchants can't recover these fees.
4. Secondary impact: Repeated disputes can harm the merchant account's 'health' (account standing), potentially leading to decreased authorization rates.

With better access and the ability to analyze your payment data, you can enhance your understanding of the reasons behind chargebacks. And by identifying these causes, businesses can take specific actions to reduce costs and alleviate chargeback fees.

Taking steps in this area is especially crucial today. Friendly fraud is becoming friendly. Recent research shows that more customers are deliberately gaming the chargeback mechanism to combat the cost of living crisis.

The data from Sift found one in four consumers admitted to committing friendly fraud. And overall, merchants noted they've experienced a 35% rise in chargebacks between Q1 and Q4 2022.

4. Reduce processor fees

Processor fees are expenses businesses encounter when accepting payments from customers. These fees typically consist of interchange fees, assessment fees, and other related costs.

Yet there are sometimes savings to be made. For instance, if your Payment Service Providers (PSPs) offer variable pricing structures, splitting your payment traffic optimally across your different providers to meet the preferred cost tier could result in substantial savings for your business.

However, the first step involves consolidating all your processor fees into a single overview. This allows for a thorough analysis and understanding of your cost base before devising a payment routing strategy that balances higher authorization rates and reduced costs.

5. Support business expansion strategies

Informed expansion strategies are critical. Expansion is expensive. The wrong step can prove a costly mistake. To plan effectively, businesses require comprehensive data from all aspects of their operations, including payment data, integral to informed decision-making.

There are several ways payment analytics can contribute to informed expansion strategies:

• Identifying growth opportunities: Transactional data can reveal patterns and trends in customer behavior, preferences, and spending habits, enabling businesses to identify markets with high demand for their products, as well as untapped customer segments.
• Evaluating market conditions: Understanding the market on the ground means understanding the competitive landscape, regulatory environment, and payment infrastructure.
• Customizing offerings: Payment data provides insights into customers' unique preferences and needs in different markets, helping businesses tailor their offerings.
• Optimizing marketing strategies: By understanding customers' payment behavior and preferences in different markets, you can develop targeted marketing strategies.
• Assessing risks and challenges: You must understand currency fluctuations, payment fraud, and cultural differences in payment behavior.

Including these insights in discussions on expansion plans empowers you to make smarter choices in exploring new markets or customer segments, boosting your chance of success and consistent growth.

See why Zip has chosen Primer to power its expansion in the US.

6. Mitigate loss from processor outages

Every second matters. Studies reveal that 62% of customers facing payment failures won't return to a website for another attempt.

Yet merchants often struggle with the lack of real-time insights into the complex payment and checkout process. With multiple potential failure points, including the payment gateway, 3DS, and fraud rules, issues can arise undetected.

Typically, merchants might remain unaware of problems for hours, leading to revenue loss and poor customer experiences. Identifying the exact cause could take even longer, exacerbating the impact. Furthermore, assessing the effects of new changes might take days, delaying the implementation of updated payment strategies.

Real-time alerts on processor outages and other critical changes in performance can save thousands while maintaining the best possible customer experience.

Learn more about how to stay on top of processor outages with real-time monitors in Observability Pro.

7. Reduce cart abandonment

Analyzing cart abandonment points in the checkout process across devices, browsers, markets, and other factors empower merchants to pinpoint areas for improvement. This data-driven approach helps prevent customer drop-offs before completing a purchase.

Learn more about cart abandonment recovery strategies.

8. Improve fraud detection and prevention

Payments fraud is an issue affecting every business. Recent research estimates businesses will lose $48 billion globally to online payment fraud this year alone. And the risks are growing. Fraudsters deploy innovative methods to find new weak spots and exploit businesses and their customers.

Here's how payment analytics contributes to fraud detection and prevention:

• Identifying unusual patterns to reveal anomalies in transaction data that could indicate potential fraud attempts like sudden spikes in transaction volumes, high-value transactions from new customers, or multiple failed attempts.
• Real-time monitoring enables you to detect and respond to suspicious activities as they occur.
• Customizable rules allow you to create and refine fraud detection rules tailored to your business needs and risk tolerance. This ensures more accurate and efficient detection of potentially fraudulent activities to reduce false positives.

By tapping into payment analytics to spot and stop fraud, you can keep losses from dodgy transactions in check, keep your customers' trust intact, and make sure their payment world stays safe and sound.

9. Customizable dashboards and simple data visualizations

Monitoring and presenting data clearly is essential to tracking critical payment metrics.

Delivering flexible and customized data is perfect for daily reporting but is also beneficial for gaining stakeholder consensus on initiatives like improving customer experience.

This can also provide both real-time and historical data to ensure you have access to all the insights you need at any given time. Scheduled reporting in our Observability tool enables you to see valuable information on demand, without having to tailor or filter it.

10: Cash flow management

To understand payment cycles and how customers handle payments, you can step up your cash flow game and reduce the chances of dealing with late or skipped payments.

Here are some ways to contribute to better cash flow management:

• Understanding payment cycles: Payment analytics can reveal patterns in payment cycles, allowing you to better anticipate and plan for cash inflows and outflows.
• Analyzing customer payment habits: Transactional data provides insights into the payment habits of individual customers or groups. You can then tailor payment terms and conditions to align with customer preferences.
• Optimizing invoicing and collections processes: Payment analytics can reveal how to charge recurring invoices better to have a better chance of a successful payment.
• Forecasting cash flow: Payment analytics can help you create more accurate cash flow forecasts based on historical payment data, allowing them to anticipate potential cash flow challenges and take proactive measures.

11. Accurate revenue and cost forecasting

Payment analytics don't just enable a retrospective analysis of your sales; they also provide valuable information that can be used to forecast future performance.

You can compare current and future trends, check monthly growth, and see which markets are growing. With this kind of foresight, you can make smarter, more informed sales decisions and revenue projections.

12. Understand the lifetime value of customers

By digging into transaction data, you can gain insights into how much revenue each customer generates over their entire relationship with the company.

Here's how it works:

1. Tracking customer spending: This helps you track how much customers spend on each transaction, monitoring purchasing behavior to reveal trends.
2. Analyzing customer segments: Group customers based on spending habits, preferences, and demographics. This identifies high-value customer segments that contribute the most to the company's bottom line.
3. Calculating customer retention and churn rates: Show how long customers typically stick around.
4. Evaluating marketing and sales efforts: Provide insights into the effectiveness of marketing and sales strategies, revealing which efforts are driving the most customer acquisition and retention.

By using payment analytics to understand the lifetime value of customers, you can make data-driven decisions to allocate resources, tailor marketing efforts, and focus on customer segments with the highest potential for long-term revenue growth.

13. Increase business agility

Boosting business agility is essential for ensuring your business can weather any economic storm, enabling you to stay nimble and react quickly to market trends, customer likes, and industry shake-ups.

Here's how payment analytics contributes to business agility:

• Real-time insights: Identify and react to emerging trends and patterns. This enables proactive decision-making and strategy adjustment to prevent potential issues and capitalize on opportunities.
• Customer behavior analysis: Analyze customer preferences and buying habits to anticipate shifts in demand and tailor offerings to meet evolving customer needs.
• Competitive analysis: Shed light on competitor performance and market dynamics, providing valuable insights into what's working for other businesses and areas of opportunity.
• Streamlined decision-making: Access to accurate and up-to-date payment data allows you to make quicker, more informed decisions. This will enable you to rapidly adapt to changes in the market, seize new opportunities, and pivot their strategies.
• Operational efficiency: Identify inefficiencies in your payment processes, allowing you to optimize operations and reduce costs. A more agile operational structure means you can respond faster to market shifts and maintain a competitive edge.

Final thoughts

Unlocking the potential of payment analytics data empowers you to gain invaluable insights, make informed decisions, and retain a competitive edge in today's dynamic market landscape.

With capabilities ranging from optimizing cash flow management to elevating authorization rates and implementing intelligent fraud detection, payment analytics provide the necessary tools and knowledge to confront business challenges effectively.

Learn how Primer Observability Pro gives you all the tools you need to manage your payments with precision.

FAQs

What are the different types of payment processors?

There are hundreds of different payment processors available. Well-known processors include PayPal, Stripe, Worldpay, Braintree, and Worldline.

Some payment processors operate in certain countries or one country exclusively, while others operate internationally. Some only work with particular currencies or payment gateways. This is why companies often need more than one payment processor.

If you're trying to find a suitable payment processor for your business, Primer's connections can help you explore different types of processors to match your needs.

How is payment analytics related to payment orchestration?

Payment analytics helps businesses visualize and understand their payment data and identify optimal transaction routes. Payment orchestration is the process of sending payments to those optimal routes.

Analytics play an integral role in orchestrating payments correctly by helping identify the best payment route to optimize for cost, conversion, and fraud protection.

Payment orchestration means integrating and managing the end-to-end payment process, including authorizing payments, routing transactions, and handling settlements. The payment orchestration process is crucial as it helps to integrate and manage full-scale payments, including the authorization of transactions and settlements. Payment orchestration platforms use automated transaction routing to detect the best routes to send payments automatically.

If you're ready to use payment analytics to improve your business processes and beat the challenging economy, we can help. Learn more about our payment analytics solution, Observability, and start your journey to making better decisions.