POSitivity: The ABC’s of Payments & Checkout

Posted by Lindy Nelson on Mar 28, 2019 9:38:25 AM

Originally published in MPE's POSitivity Magazine 

By Donald Chapman, Chief of Business Development at Modo


At Modo, we like to call ourselves #paymentsgeeks. It’s actually a term of endearment around here. Because we have a love of payments, we thought it would be fun to give a little lesson around why payments are so important in the checkout experience.

Let’s dig into the ABC’s of Payments & Checkout, shall we?


A is for Acceptance

Accepting the payment is the beginning of the buying process. You have to accept the payment for this whole selling thing to work, right? But, sometimes that isn’t as easy as it seems. Buyers across the globe want to pay using different methods from digital wallets (PayPal, Alipay), to cards, to invoicing and even cash-on-delivery.


*E-Shopper Barometer 2017


As you continue to move globally, accepting more of these payment types becomes more important to your growing customer base. Even just in Europe, there are a whole host of payment methods preferred by consumers when comparing one country to the next.



So the lesson here? Accept the money customers are trying to give you for your goods and services in their prefered form.

Seems pretty straightforward.  


B is for Buying

We think everyone can agree that buying is an essential piece of the checkout process. So why isn’t buying made as frictionless as possible? According to PYMNTS, “Online merchants lose $147 billion as a result of transactions that consumers abandon before completion due to friction in the checkout experience.” That’s a number too large to ignore. And a huge part of that checkout friction is related to the payments experience. Whether the friction comes in when your customer is required to provide details to make a payment, or what happens after they’ve done all that detail entry.



The whole point of the online experience is make it more convenient for your customers to buy. Don’t ruin all the work by offering a poor buying experience.


C is for Conversion

Oh, conversion. You get a customer on your site. They’re scrolling, they’re adding things to their basket, they’re going through the checkout process, and then they stop and abandon their cart. What can be done to change this? In a research study done by Forrester, most merchants believe that offering easy payment types is the most important factor in increasing cart conversion.


*“The State of Retailing Online 2017” a Shop.org study conducted by Forrester Research


Another study done by Baymard found “the potential for a 35.26% increase in conversion rate translates to $260 billion worth of lost orders [in the US and EU].” Wouldn’t it be great to get some of those billions back?

The lesson here: If your customers don’t actually end up buying something, you don’t get paid. Surprise, surprise.


D is for Declines and Disputes

Disputes and declines are really getting into the heart of payments so we’re loving this lesson (but also hating it because disputes and declines are bad). Fixing this payments issue can have such a huge impact on your bottom line.

Riskified estimates lowering false positive declines can increase sales revenue from 3 to 30%. We have spoken to companies with billions of dollars in volume who are seeing decline rates higher than 30%. What an impact payments can make for those merchants! And when a customer get falsely declined, what are they likely to do? That’s right - go to a competitor. We need to be talking more about this issue in the industry.

The other component to the ‘D’ section is disputes. Disputes are so hard to win and so expensive. Some merchants don’t even bother fighting chargebacks. Chargebacks911 found “merchants win about 21% of disputes. This figure is less a reflection of actual guilt or innocence, and more an indicator of how difficult representments can be.”

What we’ve learned here is: 1. You don’t want to lose a good customer to a false decline, and 2. You also don’t want to fight with your customers because you will likely lose (even if you win).   


E is for Errors, Exceptions, and rEfunds

Errors, exceptions, and refunds cost you $$$ and lots of it!

Let’s kick it off with refunds. Revolve, a cool-kid ecommerce retailer, saw returns almost as large as their net sales revenue in 2017. And they cover return shipping costs for their customers. This is insane. Think about the money it is costing them to process all of those returns.



Refunds are costly, but they also open up retailers to potential return fraud.

(More on fraud in the next section)


*Appriss Retail, “Consumer Returns in the Retail Industry”



One way to help your bottom line? Make errors, exceptions, and refunds cost less.  


F is for Fraud and Fees

Fees for payment services are just a part of the deal. The issue, though, is that there can be a huge range in these fees and you usually don’t have much control over them. In some cases, the payment fees can be larger than net profits for certain sized transactions.

To give you a sense of the average fee size, we went to our trusty online source, Investopedia, which states “Per transaction fees vary across service providers, typically costing merchants from 0.5% to 5.0% of the transaction amount plus $0.20 to $0.30 per transaction.”  0.5% - 5.0%? That’s quite the range.

Fraud is another part of the deal (unfortunately). But, worryingly, even though more is being done to combat fraud, the fraud rates continue to increase. According to PYMNTS, there was a 5.5% increase in ecommerce fraud from Q2 2016 to Q2 2017.

The lesson: Fraud and fees both create friction in the payments and checkout experience. You want less of these.


The Rundown

Impressed by what you learned? Probably not. You already knew much of that because you live and breathe ecommerce. But all we did was throw you a bunch of issues. What about the ways to solve them?

What if you could:

  • Add payment services, payment methods and countries without adding complexity?
  • Better understand your costs, on a payment by payment basis?
  • Close more sales, by routing around “soft declines”?
  • Diversify and optimize your payment service providers, for each payment?
  • Easily reconcile payments, orders, and bank statements?
  • Find fraud, errors, exceptions and other problems before month-end?


Intro Modo.

Through one connection to Modo’s /Checkout API, we’re enabling all of the providers you have or need along with all of the methods of payment you may want.


[video width="1920" height="1080" mp4="https://modopayments.com/wp-content/uploads/2019/03/Checkout_Final_1-1.mp4"][/video]


That lets us do cool things like transactional assurance. If you get a decline from one provider, we’ll simply try another one. Our dashboard also gives you better visibility into your payments across multiple providers, including settlement, and allows you to switch between them based on your business rules.

There are a variety of components and benefits to our /Checkout product from Optimize and Manage to Insights and Secure. All of which enable you to simplify your payments stack. Modo gives you one connection to the entire market of payment services, across providers and payment methods.

We’re proud to have some of the biggest names in payments, financial services, and retail like Etihad Airways, Klarna, Bank of America Merrill Lynch, Deutsche Bank, and Mastercard accessing payment services through our market.

Modo is here to do the most good, for the most people by reducing friction in payments. And there are quite a few ways we can help with the challenges we laid out in The ABC’s of Payments & Checkouts.


Want to learn more about how Modo can help you reduce friction in your payments experience? Reach out to us at info@modopayments.com.


Topics: modo in the news, /checkout, #paymentsgeekthoughts