The challenges of accepting online payments

Discover what merchants need to look out for and how they can protect their payment stack
July 07, 2021 | Expertise

With the digital revolution expedited by a certain pandemic, many businesses have moved part or all of their operations online. In this article we are going to look at some of the biggest challenges that eMerchants face when it comes to accepting online payments and what they can do to mitigate them in order to protect and grow their business.

How can an online merchant integrate and offer payments on a website?

Let’s start at the very beginning, a very good place to start. In order to accept online payments merchants first need a merchant account. A merchant account is a type of bank account that allows businesses to accept payments in multiple ways. In order to get a merchant account or MID, there needs to be a contractual agreement with an acquiring bank. If you are to use a multi-acquirer set up, you will need to have MIDs with each acquiring bank that you use. In choosing a payment provider/acquirer, merchants need to consider:

Payment options - does your provider offer more than one payment method?

Security - how do they protect the transaction and sensitive payment data? 

Customer-focused - does it provide a good user experience? 

Once a merchant has found the payment provider or providers that they want to work with, they then need to connect to them. Building these connections is not simple. In fact, it takes a surprising amount of man hours to integrate. Not only that, but once the PSP or acquirer has been integrated, the connection needs to be maintained. Again, this requires time and money. In using a payment orchestration layer, merchants can connect to multiple payment service providers and acquirers from just one API. All maintenance is done by the payment orchestration platform, saving the merchant time and money.

How can merchants accept multiple payment methods and currencies?

Which brings us nicely to point two. How can merchants accept multiple payment methods? The global economy enables merchants to sell in more than one jurisdiction. However, in order to do so, merchants need to be able to accept multiple currencies and also offer different payment methods. Different markets have different preferred payment methods, these are known as Alternative Payment Methods (APMs), or Local Payment methods. By not offering a payment method that a specific market is used to or has access to will hinder the business growth. By providing methods that consumers are familiar with and trust, businesses will increase conversion rates and in turn profits. A payment orchestration platform will allow a merchant to connect to multiple payment providers in multiple markets. It will also give them the opportunity to route transactions to the most appropriate provider in order to receive the best rates. With smart integration options, the popular domestic and international payment methods will appear to the consumer based on geo location, risk assessment, and platform specific data. 

See all the different payment methods and providers available with IXOPAY here.

How can merchants avoid chargebacks and lower their chargeback ratio?

Chargebacks are one of the biggest issues that online businesses face. But what is a chargeback? A chargeback is the term given to the reversal of a transaction because of the customer disputing the transaction. This happens when a customer does not recognize the transaction or claims that they did not receive the item.  

Chargebacks are damaging for the business owners as they incur a chargeback fee, not only that but they also negatively impact consumer trust. When there are too many chargebacks, Payment Service Providers and acquirers may decide that they no longer wish to work with you, and pull the plug. Resulting in your business no longer being able to accept payments. The rate which your acquirer will find unacceptable depends on their risk appetite. Before termination of a contract you may be placed on a chargeback program, this is where your business is carefully monitored. This generally happens if you have at least 100 chargebacks, and a ratio between 0.9% and 1.5%.

Some measure that merchants can take are: 

  • Prevent chargebacks that stem from avoidable merchant errors ie. make sure your products are as advertised.
  • Watch for potential fraud triggers: create risk rules and monitor transactions in real time.  
  • Use fraud detection tools such as 3D Secure, Address Verification System, etc.
  • Stay connected: make sure it’s clear how customers can contact you.
  • Use clear billing descriptors: Include contact information in the descriptor if possible.
  • Have a clear refund and cancellation policy in place, to avoid confusion. 

There are companies that specialize in helping merchants reduce their chargeback process, such as Chargebacks911, these can be integrated into your payment setup.

How can merchants protect themselves against payment fraud?

Where there’s money there’s fraud. Credit card fraud is growing, and one reason is that more and more people are making online purchases. So what can a merchant do to protect themselves against credit card fraud? Using a payment orchestration platform that offers integrated payment solutions such as a Risk Management Engine allows merchants to take better control of the transaction. The Risk Management Engine enables merchants to set up risk rules that detect and lower fraudulent transaction attempts. These rules are then used to give each transaction a risk score. Depending on this risk score merchants can either accept, flag, push to manual review or decline the payment. 

Using tokenization is a great way to protect your customers from data leaks. Tokenization is when payment data is stored in a secure vault and a random token replaces sensitive information. Unlike encryption, tokens cannot be reversed engineered. Learn more about the benefits of tokenization here

How can merchants reduce processing fees and increase profit margins?

Payment processing fees when added up can take out a sizable chunk of your profit margin. There are several things a merchant can do in order to reduce the fees paid. 

Centralized Payments Setup and Management 

By centralizing a payment setup merchants will have a complete and accurate overview. This will simplify the payments processes and allow for quick analysis of payment data. With the IXOPAY Dynamic Dashboard users can filter via payment methods, country, date, risk score and more. By using a smart transaction routing engine merchants will be able to generate profit while incurring low costs. This is because they will be able to send transactions to the most appropriate acquirer in order to get the best rates. The general rule is, the further away geographical the payment method is from the acquirer, the more expensive it will be. With payment orchestration, merchants can create rules that will dictate where a transaction should be processed. These rules will not only give the merchant the best rates but also increase the amount of approved transactions. 

Reduce Payment Fraud

As discussed above, fraud is an inevitable aspect of being an online merchant. However, it can also increase the processing fees you pay. The rule is the higher security risk you pose, think industries such as iGaming, travel, or adult entertainment the higher your credit card processing fees will be. In order to limit the amount of fraudulent transactions by credit card fraud, friendly fraud, chargebacks etc. merchants can use the payment orchestration platform’s fraud prevention tool as well as connect to third party software suppliers. By implementing ways to protect your company against fraud you will also benefit from lower processing fees.

Negotiate better deals with payment service providers

A good way to negotiate better deals is to be independent. Meaning don’t tie yourself to one acquirer as in doing so you will be at their mercy unless you switch. However, switching can be tricky when all of your payment data is stored by them. By being independent and using a 3rd party vault to store customers' payment information you will have far more leverage when it comes to negotiating deals, and will have the opportunity to ask for lower transaction fees, processing fees, etc.

How can eMerchants optimize their checkout processes for a greater user experience?

If a checkout page is too complicated and difficult to navigate, customers will simply abandon their baskets. In order to get them over the last hurdle, merchants should provide an intuitive payment page. Intuitive, in the sense that the right payment methods will be provided based on geolocation, platform specific data, and user history. By offering the right payment methods keeping the payment pages simple, users are more likely to complete the transaction and return. 

Now that we have discussed some of the biggest pain points for merchants online payments systems and how they can be avoided, why not get in touch with the IXOPAY team to see how your business would benefit from a payment orchestration platform.

Want to know more about payment orchestration?

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IXOPAY is a payments orchestration platform enabling independent, flexible and global payment processing. As a highly scalable and PCI-DSS certified “fintech enabler”, IXOPAY fulfills the needs of large merchants as well as those of “white label” clients: payment service providers (PSPs), acquirers and independent sales organizations (ISOs). The modern, easily extendable architecture offers smart transaction routing & cascading, state-of-the-art risk & fraud management, fully automated reconciliation and settlements processing, comprehensive reporting as well as plugin-based integration of acquirers, payment service providers and alternative payment methods (APMs).

IXOPAY is part of the IXOLIT Group, founded in Vienna, Austria in 2001. With local entities in Austria and the USA, IXOLIT supports national and international customers across various industry verticals. The owner-led and -financed company has grown from 2 to more than 65 employees and is focused on building innovative solutions for eCommerce.

Please find more information about IXOPAY here:

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