Leverage our Inside Knowledge to enhance your payments

In the dynamic landscape of global eCommerce, it is crucial for businesses to understand and optimize payment methods to ensure a seamless and successful transaction process. The optimization of payments, ranging from check out processes, payment recovery, payment fees to fraud rules analysis as well as Alternative Payment Methods (APM) coverage, stand as key pillars in optimizingeCommerce. Companies that dedicate sufficient resources to redesigning their business processes to accommodate diverse payment methods, creating a smooth omnichannel customer experience can be challenging when it comes to payments. The goals of eCommerce players are focused on reducing chargeback costs, lowering dropout rates, and improving turnover. This strategic focus not only streamlines payment operations but also empowers businesses to thrive in the rapidly evolving digital marketplace. 

Understanding eCommerce Payment Systems 

In the world of global eCommerce payments need to accommodate the requirements of security, effectiveness, and convenience for both customers and merchants but over time the complexity has increased substantially –  read more about how the payments’ four parties model became over time an “n” parties model 

Essential factors to consider for an eCommerce payment infrastructure comprise: 

1. eCommerce Payment Processors and Gateways 

  • Payment gateways capture and send payment information from the eCommerce platform to the payment processor. 
  • Payment processors are responsible for verifying available funds and transmitting transaction approvals. 
  • Together, they ensure that customer payment information is securely processed, verified, and that funds are deposited into merchant accounts. 
  • Orchestrators always provide the optimal way to execute payments (gateway, acquirer, …) globally to save costs, increase security and reduce drop outs. 

2. Variety of Payment Methods 

  • The digital era has ushered in a multitude of payment methods, including but not limited to digital wallets, crypto, credit and debit cards, and bank transfers. This diversity not only makes online shopping more accessible but also caters to the preferences of a global customer base, enhancing the overall shopping experience. 
  • In the first half of 2023, the total number of non-cash payment transactions in the euro area increased by over 10% to 67 billion compared with the first half of 2022. Card payments accounted for 54% of the total number of non-cash payments, while credit transfers accounted for 22%, direct debits for 15%, and e-money payments for 7%. 
  • Digital wallets are projected to drive global transactions beyond €10 trillion by 2028, with a remarkable +12% CAGR between 2023 and 2028. Contactless payments and mobile payments have seen widespread adoption across different European countries. 

3. Security and Compliance 

  • Advanced encryption algorithms and fraud detection systems fortify digital transactions against unauthorized access, ensuring a secure shopping environment for customers. 
  • The Trusted Execution Environment (TEE) serves as a noteworthy example of a security processor for payments, commonly integrated into mobile devices to establish a secure and segregated environment for handling sensitive payment and financial data. Companies like Trustonic and Qualcomm offer TEE solutions that create a secure execution environment within a mobile device’s primary processor. These solutions employ hardware-backed security measures to protect critical operations, including payment processing, authentication, and cryptographic key storage, from potential threats such as malware and unauthorized access.  
  • Compliance with PCI standards and the implementation of tokenization are crucial considerations for eCommerce payment processors, safeguarding sensitive payment data. For example, Datatrans‘ tokenization service provides businesses with a secure and efficient means of processing payment transactions while minimizing the effort and costs associated with PCI compliance and enhancing overall data security. 

Understanding and integrating these factors effectively can significantly enhance an eCommerce platform’s operational efficiency, security, and customer satisfaction. 

Global eCommerce Payment Trends  

In the vibrant landscape of fashion eCommerce, global payment trends play a pivotal role in shaping consumer preferences and business strategies. The digital payment ecosystem is experiencing rapid evolution, marked by the following significant trends: 

  • Digital Wallets Dominate: With a commanding 49% share in e-commerce and 32% in point-of-sale (POS) transactions, digital wallets have emerged as the leading payment method worldwide. Their convenience and security features make them a preferred choice among consumers, particularly in the rapidly expanding fashion eCommerce sector. 

  • Rise of Alternative Payment Methods: 
    • Pix in Brazil: Capturing a 29% volume share in e-commerce, Pix stands out for its real-time payment capabilities, offering an efficient and secure transaction process. 
    • UPI in India: Dominating over 75% of retail digital payments volume, UPI’s widespread adoption highlights the shift towards contactless and mobile-first payment solutions. 
    • Sofort (Pay Now) in Germany: widely used online bank transfer method in Germany, offering fast and easy payments using online banking details. It is popular in other European countries such as Austria, Belgium, Italy, Poland, Spain, Switzerland, and the Netherlands. 
    • Cartes Bancaires in France: dominates the French market, with most cards being co-branded with Visa or Mastercard, offering a preferred payment option for French consumers. 
    • Przelewy24 in Poland: innovative online banking payment method that has gained significant traction in Poland, offering a seamless payment experience for Polish consumers. 
    • Pay by Bank app in UK: This payment method allows consumers in the UK to make direct bank payments for online purchases, providing a secure and efficient payment option. 
    • AliPay Face and Palm swipe fusion payment: AliPay registered a new patent for a novel method of payment that combines facial recognition and palm scanning, two distinct biometric authentication methods into a seamless and secure transaction process. 

  • Evolving Consumer Preferences: 
    • Buy Now, Pay Later (BNPL) Services: Increasingly popular, especially among millennials and Gen Z consumers, providing flexible payment solutions. The BNPL trend is becoming popular across Europe, with a projected market size of €300 billion by 2025. It is estimated that by 2025, BNPL will capture around 11% of the European e-commerce market. 
    • Sustainability and Social Commerce: Consumers are gravitating towards brands that align with their values, such as sustainability, and those that offer seamless shopping experiences through social commerce platforms.Facebook leads in the number of social commerce buyers, with an estimated 64.6 million buyers expected in 2024.  Instagram is projected to have 46.8 million social buyers in 2024. 

These trends underscore the importance of adopting a dynamic, customer-centric approach to payment method selection and optimization in eCommerce, ensuring businesses stay ahead in the competitive digital marketplace. 

Overcoming Payment Challenges 

To effectively overcome payment challenges in the global eCommerce landscape, businesses must adopt a versatile approach focusing on provider selection and negotation, security, and customer convenience. Here are insights into the methodology on howto navigate these challenges: 

1. Wise Payment Service Provider Selection 

  • Conduct a comprehensive assessment to clearly outline the requirements for payment methods and identify the crucial payment methods that significantly contribute to savings and revenue generation. 
  • Facilitate the negotiation of transaction fees with the chosen processor to achieve substantial cost reductions – compare all 160 pricing elements and take into account the service level 
  • Conduct thorough research and comparative analysis of diverse payment gateway providers to ensure alignment with the unique requirements of your eCommerce platform. 
  • Meticulously select a payment gateway that seamlessly integrates with your eCommerce platform, guaranteeing a streamlined transaction process. 

2. Enhancing Security and Compliance 

  • Implementing fraud prevention measures is vital for merchants in today’s dynamic business environment. Proactively integrating comprehensive strategies can significantly reduce the threat of fraudulent transactions, thereby safeguarding revenues and preserving customers’ trust.  
  • Robust fraud prevention measures demonstrate a commitment to security and integrity, enhancing your brand’s reputation and fostering long-term customer loyalty. 
  • Uphold adherence to stringent regulatory requirements, such as PCI-DSS and AML regulations, to not only ensure legal compliance but also to cultivate trust, fortify security measures, and uphold the integrity of the financial ecosystem. 

3. Optimizing Customer Payment Experience 

  • Diversify Payment Options: Provide an array of payment choices, encompassing both international and local methods, to effectively accommodate diverse customer preferences and enhance convenience. 
  • Transparent Refund Policy: Establish and communicate a transparent refund policy to instill confidence in customers, manage expectations, and reinforce trust in the brand. 
  • Proactive Dispute Resolution: Ensure prompt responses to customer complaints, payment disputes and chargebacks, and effectively resolve issues, thereby bolstering customer satisfaction and trust. 
  • Customer Education on Safe Online Practices: Empower customers with knowledge on secure online shopping practices to mitigate the risk of fraud, elevating their shopping experience and fostering a sense of security and confidence. 
  • Streamlined Checkout Process: Simplify the checkout procedure by minimizing steps and reducing required information, thus optimizing customer experience, and expediting the payment process for increased convenience. 

By implementing these strategies, businesses can not only navigate payment challenges but also enhance their global eCommerce operations, ensuring a secure, efficient, and customer-friendly payment process. 

How did we aid a global eCommerce enterprise? 

A global eCommerce fashion retailer embarked on a journey to transform its Direct-to-Consumer brand into a trailblazer in the fashion industry. With a tribe of over 400,000 loyal customers and an innovative, sustainable bodywear line available in more than 120 countries, the retailer set out to improve its omnichannel payments, enhance local and alternative payment methods, recover transaction declines, analyse and report data effectively, and streamline reconciliation processes.  

Our team initiated a series of strategic actions to facilitate the enhancement of its global eCommerce payment infrastructure. The process started with a thorough initial audit and potential assessment. We organized two design workshops and collected most of the detailed information through secured online forms. Based on our analysis we developed a comprehensive business case highlighting the full payment improvement potential of our customer. Out of the design workshops, we identified the desired features and designed the future process of working. Our team collected all the requirements from the initial audit to prepare the next phase: preparing the request for proposal (RFP), through which the company with great attention identified the most suitable payment service providers and potential partners. Following this, the RFP was presented to relevant stakeholders for comprehensive review and consideration. 22nd diligently evaluated the responses to the RFP, undertaking a thorough assessment to identify the best-suited options capable of aligning with the eCommerce retailer’s strategic objectives and operational requirements. 

By implementing the measures proposed by 22nd and adopting the recommended provider, the results of the transformation were truly remarkable: 

  • -85% chargeback costs indicating a significant decrease in disputed transactions and associated expenses. 
  • -35% dropout rate, highlighting a substantial improvement in customer retention and engagement due to streamlined payment processes and enhanced customer experiences. 
  • -27% on the total payment costs, resulting in a significant reduction in operational expenses related to payment management and fraud mitigation. 
  • -42% fraud and +15% turnover impact, reflecting a substantial increase in revenue due to the optimization of payment methods and enhanced customer trust and satisfaction. 

The success story of the global eCommerce fashion retailer serves as a testament to the positive outcomes that can be achieved through strategic enhancements in payment processes and customer engagement initiatives.  

Follow this link to learn more about our Merchant Payment Improvement Program. 

Written by Markus Melching