There are few things more important for a business owner than seamless payment processing. But evaluating your platform’s performance can be daunting, especially when you aren’t sure what figures to track. That’s why identifying key performance indicators (KPIs) is essential.
Electronic Merchant Systems (EMS) has helped businesses perfect their payment processing for over 30 years. We know exactly what’s essential to track and how to measure it effectively.
Here, we’ll take a look at six major KPIs for payment processing spread across three categories.
Contents:
Conversion Rates
The most important metrics to keep track of for payment processing are conversion rates.
At a basic level, that means tracking the total number of conversions over the total number of potential or attempted transactions—a simple percentage. You want to be as close to 100% as possible.
But this base-level percentage is not necessarily the most useful.
You’ll also want deeper insights into the specific kinds of payments being made. In particular, you should be tracking how successful they are (or aren’t) based on the method of payment (ACH, credit card, etc.). Beyond that, you should also track the specific inputs within that method (bank, card type, etc.).
1. Conversion by Payment Method
Simply put, you should always try to accommodate as many payment methods as you can. It’s one of the best practices for payment processing we recommend to all businesses; giving your buyers options like paying via mobile phone app helps you capture the most revenue possible.
However, that flexibility also comes with its own challenges.
Accepting more forms of payment means opening up possibilities for things to go wrong with newer, buggier, or relatively uncommon options. These can lower your conversion percentage.
So, to fully understand which payment options are performing seamlessly and which might be worth troubleshooting (or dropping), you should keep track of conversion by payment method.
2. Conversion by Specific Input
In some cases, you’ll want to get even more granular with the details.
Beyond looking just at the methods of payment converting (or failing), you should also account for the specific input within a payment method. For example, you can track conversion by:
- Type of card used or card issuer
- Type of mobile app (Apple/Google Pay)
- Third-party platforms (PayPal, etc.)
And for another level of specificity, you can even track interactions between these inputs and the places purchases are being made. For example, Apple Pay might work seamlessly on your website, but issues might still turn up on in-store POS interactions. You should flag that!
All in all, this amounts to looking closely at the specifics of your conversion rates.
Failures (to Convert)
The next category is all about learning from mistakes. Payment failures can happen to anyone for a multitude of reasons. When they do, it’s almost always bad for the business. On the B2C side, most customers who experience a failed payment won’t give the website another chance.
So, generally speaking, you want to keep failures as low as possible.
What's the best way to do that? Dive into the reasons payments are failing—whether they have to do with processing or not—to figure out how to solve any problems, would-be buyers are facing.
3. Payment Platform Uptime
Often, issues that bring down your conversion rates will be system failures—instances when the payment infrastructure you’re using simply isn’t working (hopefully for a short amount of time).
When this happens in a brick-and-mortar store, there are usually other solutions available. In a pinch, older shops may still have carbon copy imprinters for delayed key-in credit card entries.
But in an e-commerce environment, downtime might mean losing purchases. That’s why you should keep a close eye on your uptime, tracking both instances and duration of system failure.
The performance of your chosen payment platforms is relatively out of your control. However, what is in your control (in most cases) is what platform you choose. To that effect, you want to make sure you have one that meets your customers’ needs and minimizes system downtime.
4. Cart Abandonment Rate
Online shoppers seemingly love to fill their carts with items to buy, then bounce away without actually making a purchase. Average abandonment rates have been about 70% across the last decade.
If it’s happening in your e-commerce store, rest easy! Pretty much every retailer deals with it.
Some of the top reasons for abandonment, according to Baymard Institute, are:
- Excessive “extra” fees (48%)
- Needing to create an account (24%)
- Slow delivery on past orders (22%)
- Trust issues with payment information (18%)
- Lengthy or overly complex checkout (17%)
You can cover for issues like these by making costs as transparent as possible, allowing for purchases without accounts, and ensuring a seamless and secure purchase experience.
However, you should also try to track other reasons your customers are abandoning their carts by identifying trends like when they abandon and common kinds of purchases abandoned.
5. Sales Funnel Bounce Rate
This category is actually only tangentially related to payment processing, but it’s worth tracking nonetheless. It helps you garner insights about what kinds of consumers are abandoning carts.
In many cases, the issue might have to do with factors before the buying decision itself.
According to one study, the average conversion rates across Google Ads are 4.4% for the search network and 0.57% for the display network. That means that out of 1000 potential buyers who see your search or network ads, between 6 and 44 are likely to make a purchase. Slim pickings.
Of course, that number goes up as potential customers travel down the sales funnel.
Once a reader clicks on your landing page or your blog, the likelihood they’ll make a purchase increases at every turn. If they do bounce out, though, you should carefully track where they do.
The place(s) potential buyers bounce out will also tell you whether the problem has to do with your payment infrastructure or if it is truly unrelated. And ruling out variables is important!
Possible or Actual Fraud
This last category concerns risk: how likely it is that your payment infrastructure (i.e., its users) could be subject to fraud. The most basic thing to track is how often you face fraud claims.
The payment industry is, unfortunately, a frequent target of fraudsters and bad actors. This is because the payment industry turns credit cards into cash. Cybercrimes can be done with a view of anonymity, so if you sell online, you should utilize and monitor the fraud settings that are available on your platform
Obviously, you need to do everything in your power to prevent all forms of actual fraud.
But you should also concern yourself with accidents and near-misses that could look like fraud to a financial institution, customer, or strategic partner. In some cases, they can be just as bad.
6. Chargebacks and Refunds
The biggest fraud-like scenario you should be tracking closely across all of your payment processing infrastructure is your chargeback rate. Usually, chargebacks work like this:
- A purchase is made using a particular customer’s credit or debit card
- That customer disputes the purchase with the card issuer or bank
- The card issuer credits the customer with the funds and charges you
- You get a chance to dispute the chargeback (with the card issuer)
Importantly, chargeback disputes aren’t always about claims of fraud. They can also be the result of customers seeking a refund for an item that they purchased fully legitimately.
In any case, you should be tracking and trying to reduce your amount of chargebacks. Why?
The biggest factor is that one reason your business can end up on the Mastercard Alert To Control High-risk Merchants (MATCH) list is processing too many chargebacks. MATCH replaces the Terminated Merchant File (TMF), but it works the same way—you want to avoid being on it.
What’s Next?
No matter what kind of payment processing you do, these KPIs are critical to getting the most out of it. You’ll want to keep track of them, analyze them, and base your decisions on them.
You need to understand how often you’re converting to replicate and build on successes.
Likewise, you need to know how often and why you’re failing to reduce those factors as much as possible. And you need to take a look at fraud risks—real and potential—to minimize them.
Here at EMS, we’ve been helping companies do these things since 1988. Partnering with us gives you access to unparalleled insights and support for seamless payment processing. Get in touch today to learn about what our platform can do for you!
You may also be interested in these educational articles:
Most Frequently Asked Questions About Payment Processing
Laws and Regulations in Payment Processing You Should Know For 2022
6 Signs it’s Time to Switch Payment Processing Vendors
Have even more Payment Processing Questions?
Click on the link below to check out our ultimate guide on How to Choose The Right Payment Processor for your business.
