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How marginal gains will set you up for gold medal payments success

Not so long ago, the British cycling team was not just uncompetitive but even described as “laughing stock.” Today, they’re world-beaters.  And the secret to that success is not the sudden discovery of new talent. Rather, it is by taking a highly granular approach to training and preparation – focusing on making “marginal gains” in multiple areas, including everything from obvious areas like bike aerodynamics, to areas in which many competitor nations would not even consider, such as the right antibacterial gel to cut down on infections.

The thinking was if the team could improve by 1% across multiple areas, these marginal gains would add up into a world-beating team. And that has been proven to be correct.

So how does this apply to ecommerce payments? Even today, many brands’ main concern with the checkout is simply that it works well from a shopper perspective. However, there are numerous more areas in which brands can make that incremental 1% improvement, which will add up to significant savings and potentially millions of additional revenues for large businesses.


Increase conversion with optimized checkout pages

There are a wide variety of ways to make marginal conversion gains on the checkout page. These include testing and fine-tuning variables including the number and type of payment methods, the order in which they are shown, the length and placement of checkout copy, and the colour, size, and placement of buttons. That is just the beginning. To really move the needle on checkout conversion, you should take all the variables above and A/B test and continuously tweak for mobile screens and different markets. You may find, for example, that while several payment options drive increased conversions on desktop, on mobile screens a single option may prove to be more effective.


Take a smart approach to fraud management

Traditionally, fraud management has been focused on blocking fraudulent shoppers, but the problem with this approach is that inevitably, merchants also block genuine transactions that look fraudulent.

A marginal gain approach to fraud looks at it from a different angle. Instead of just stopping fraud as the aim of the game, the KPI should be revenue growth through smart fraud management . Businesses with this approach connect multiple data points, such as card numbers, machine fingerprinting, email and IP addresses, and even basket value and time of day, to assign risk scores to transactions, and fine tune the balance between stopping fraud and approving genuine transactions, based on their specific merchant situation, thus minimising false positives.

The merchant situation is important because it can have a massive impact on your marginal gains approach to risk management. For example, a digital goods merchant may be happy to live with a small number of fraudsters making successful purchases if it means that successful transaction rates from genuine shoppers are sky high. On the other hand, a high end retail brand or airline loses significant amounts for each successful fraudulent transaction, so for these businesses tighter risk controls may lead to better marginal gains.


Incrementally increase authorisation rates

Whilst two thirds of declined transactions are due to legitimate reasons such as invalid cards or insufficient funds, a third of these failures (or 2-3% of all transactions) are rejected due to legacy systems or bank miscalculations.

Depending on where a business is operating and whether it is a global or domestic merchant, routing international transactions via a local network will likely deliver marginal gains in terms of higher authorisation rates. Due to the different propensity for a shopper to choose a certain payment method, merchants need to make sure to plug into local acquirers if their payments’ partner does not have local acquiring capabilities.

Other ways would include changing the format of authorisation requests to the preference of each issuing bank, with a view of increasing the chances for the transaction to be processed correctly and without failure. The “auto-retry” option can also be an easy way to process a payment, which has failed because, for example, of a temporary faulty connection.


The proof: gains of 1%+ by global merchants

Success with the 1% improvement across multiple areas is not limited to the British cycling team. According to a Forrester report, analysing and acting on transaction data in the ways above can increase conversion rates up to 1.4%. The net result of these marginal gains is millions of dollars of incremental revenue, improving the shopper experience, and transforming also-ran payments operations into gold medal-winning teams. 


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