How to choose the right payment provider

Sanjay Sarathy, CMO Vindicia, outlines the critical questions to ask yourself and your payments vendor for success in building your online revenues.

For any new online business, how you capture and manage payments is directly linked to your ability to grow revenues.  It’s also one aspect of your business very likely to be outsourced, as you and your team focus resources and energies on the core business.

Choosing the right provider can help you find the right customers, and keep them. If you get it right, it can increase your revenue by up to 30% globally.  But the process of successfully accepting payments online is part science and part art, and following a few simple steps will go a long way to ensure you get the most from your payment provider.

1.  The demographics of your audience today and in the future will play a large part in determining what types of payments you need to support. For example, you need to identify the top 3 payment methods and currencies for the geographies and audiences you care most about. Does your payment provider support these?

2.  Does your payment provider support the Account Updater functionality laid out by the card associations?  This allows payment providers to successfully update credit card #s “behind the scenes”, and can add 1-2% to your overall successful transaction rate.

This is especially important if you have a subscription billing model with long stretches between payments (e.g., annual plans). People replacing lost cards, banks merging and other situations can result in card numbers changing. With Account Updater, your customer’s correct credit card number will be billed without your having to reach out to the customer in question for updates.

3.  How does your payment provider handle chargebacks? Chargebacks occur when the consumer refutes a credit card transaction that appears on the bill.  Does your payment provider manage and fight those on behalf of merchants?  Best practices have shown that merchants can win between 65-70% of chargebacks that are legitimately disputed.

4.  Digital services are taxed differently in various regions of the world.  How does your payment provider handle and calculate these taxes, and can they keep up with the constantly changing tax regimes around the world?

5.  Customer retention is a critical component of your business strategy, and your payments provider can actually play a big part in this effort. What does your payment provider do to overcome failed transactions, besides contesting chargebacks and using Account Updater?  Based on best practice techniques, you should be able to add between 8-10% to your annual revenues just from customers’ previously failed transactions actually going through.

6. Communicating with your customers about upcoming bills plays a large role in optimising customer retention, especially with subscription business models. There are different best practices associated with, for example, how you pre-notify clients on annual subscriptions versus those on a monthly plan.  You should ask your payment provider if they understand these issues and whether they can support you with communications and marketing strategy based on customer data.

7.  Reporting and reconciliation are critical elements of any billing and payments strategy.  What sorts of reports does your payment provider deliver, and do these map to the critical business metrics you care about?  Are you able to work with both ‘canned’ reports and the raw data that you can import into your own analytics engine? How do you reconcile the payments and billing information with your financials system?

8.  Compliance, especially dealing with credit card information, is a critical component of your online business model.  The PCI standard is one laid down by the credit card associations and governs the security of credit card information. Ask your service provider if they are a Level 1 Services Provider under the PCI DSS standard, and verify that they are on the Visa website to ensure your customers’ card details will be secure.

9. Any digital business will need to be flexible and experiment with business models to find what suits their customer, and increases revenue. Can your payments provider support multiple business models – i.e. micropayments, subscriptions, freemium? If you do decide to change your model, can your provider efficiently and cost-effectively support this?

10. How long will it take your payment processor to implement your transaction infrastructure? For some merchants, the timeframe will be an important consideration.

11. Storage and security are vital. Your customers will be handing over their personal details, and so trust that your payments provider can and will secure sensitive data through encryption, and physical guards is crucial. Also, the capacity to store all this data cost effectively must be considered.

Finally, good luck with making your digital business profit and in finalising your payments strategy.  SaaS flexibility can prove essential if you want to not only acquire customers, but retain them too.

http://blog.vindicia.com