How Open Payments Boost Performance

Payment failures can be a constant challenge for merchant aggregators as they grow and handle an increasing number of gateways and transactions on a global scale. Consumers expect their preferred payment methods to work every time they transact, and they will abandon purchases if they suffer false declines. Merchants are impacted by consumer discontent with lost revenue and customer churn.

Implementing open payments platforms can be a crucial business strategy, not simply by offering the broad payments connectivity that merchants need to serve a growing global customer base. These platforms can be equally important for their ability to improve payments’ performance. They do this in three primary ways. First, open payments boost conversion rates and reduce false declines. Second, open payments platforms provide merchants with a consolidated source of key performance metrics to measure and assure their success. Finally, in the case of subscription businesses, open payments platforms prevent the loss of customers to involuntary churn when payments inadvertently fail.

Open Payments Increase Customer Conversion

Open Payments Provide Merchants With Key Performance Metrics

Open Payments Help Subscription Platforms Reduce Churn

Making the Most of Open Payments Performance

Open Payments Increase Customer Conversion

Consumers grow frustrated and may abandon merchants when their preferred payment methods are declined. Aggregators that employ open payments platforms can help ensure that their merchants’ sales are successfully completed.

False declines are costing businesses billions of dollars in lost revenue.

A PYMNTS Intelligence study found that in the United States, $157 billion was estimated to be at risk due to false payment declines in 2023. Moreover, it was projected that despite all recovery efforts, $81 billion would ultimately be lost. Forty-seven percent of retailers said false declines have a very or extremely negative impact on customer satisfaction. These losses — both financial and reputational — impact small- to medium-sized businesses (SMBs) even more keenly, with 58% of these retailers citing high levels of impact.

$157B

eCommerce sales that were estimated to be at risk in the U.S. due to false payment declines in 2023

In addition, 82% of online retailers reported difficulty in identifying the causes of failed payments. Eighteen percent cited this difficulty as their top payments challenge. Other key related challenges included negative impacts on a company’s reputation (62%), increased staff workloads (59%), and expenses related to tracking and resolving failed payments (56%). A payments stack that uses an open payments platform offers an effective solution for this critical issue.

Open payments’ ability to route a payment prevents the loss of revenue to false declines.

Intelligent routing directs payments to the optimal gateway for each transaction. This may involve selecting the gateway with the lowest fees for the merchant — or trying a different gateway when a payment fails. Intelligent routing options consider factors such as card type, banking providers and historical transaction data to determine the ideal gateway.

This approach not only can capture a previously lost payment but also can reduce processing fees and streamline operations by minimizing human intervention. Customers benefit from a smoother, more seamless experience, which promotes a more positive impression of the retailer. This in turn increases the likelihood of return visits and boosts future revenue.

Open Payments Provide Merchants With Key Performance Metrics

Performance metrics are invaluable for merchants and aggregators, providing key insights into payments. Open payments platforms grant centralized access to this data, enabling merchants to make more strategic business decisions.

Open payments systems provide merchants with data they can use to enhance services.

61%

of merchants see payments as a key area for achieving competitive differentiation.

Customer purchases on open payments platforms provide merchants with valuable data points, helping them build comprehensive insights into payment preferences. Merchants and aggregators can use this data to enhance the customer experience and strengthen loyalty. A survey revealed that 61% of merchants viewed payments as a key area for achieving competitive differentiation, particularly through the ability to personalize customer experiences based on payments data. This personalization can in turn increase customer spending, providing merchants and aggregators with even more data for optimizing the payments experience.

Optimizing payments performance can lead to operational improvements.

Spreedly found that this optimization led to higher transaction success rates, improved customer convenience and increased customer loyalty. These benefits stem from the enhanced efficiency that open payments systems provide. By dynamically routing payments through the most effective gateways, transactions become faster and smoother, encouraging customers to return, thanks to the streamlined experience.

Open payments systems also support merchants with risk management and compliance. They automatically update card details and tokenize sensitive data, helping to protect merchants from fraud while ensuring adherence to security regulations.

Open Payments Help Subscription Platforms Reduce Churn

Failed payments are particularly damaging to subscription businesses. They can result in the immediate and permanent loss of a subscriber, often without their awareness. Open payments help mitigate these failures and customer churn.

Involuntary churn is a perpetual challenge for subscription businesses.

Customer churn is a constant struggle for subscription businesses, with many customers discontinuing service for various reasons. One especially problematic form, however, is involuntary churn, which occurs when a customer becomes unsubscribed inadvertently due to a failed payment. A survey found that 40% of subscription businesses experienced a rise in involuntary churn over the past year. Seventy-nine percent had yet to implement strategies to mitigate this attrition, such as retrying payments at a later time. Many involuntary cancellations go unnoticed by customers who use a service infrequently and fail to realize their subscriptions have not renewed.

79%

of subscription businesses have yet to adopt measures like payment retry systems to prevent accidental customer churn.

Open payments platforms help counter this churn and drive recurring subscription profits.

Preventing involuntary churn has become a top priority for subscription firms, and open payments systems offer an effective solution. When a payment fails, an open payments system can automatically try alternative gateways to complete the transaction. Open payments cannot prevent all involuntary failures, but these systems can greatly reduce the rate of churn by strategically updating vaulted payments and providing active life cycle management.

Making the Most of Open Payments Performance

Open payments platforms provide merchants with valuable data and analytics. By centralizing payment information across multiple gateways and processors, these platforms provide a comprehensive view of transaction performance. Merchants gain insights into key metrics such as authorization rates, decline reasons and transaction costs across different payment methods and geographies. This information facilitates data-driven decision-making to optimize payment strategies and improve overall performance. These insights enable merchant aggregators to offer value-added services to their merchant customers. They can provide benchmarking data, identify areas for improvement, and offer tailored recommendations to reduce costs and boost payment success rates.

Open payments platforms also help boost success rates and therefore revenue through sophisticated retry logic. These systems automatically retry failed transactions, maximizing recovery rates.

As a savvy business operator, flexibility to make pivots is super important to run a great business. Having access to data to make those decisions but also having the flexibility to pivot and bring new products to market is key. You need to be fearless to make those pivots. The time to make the investments is now.”

Peter Dougherty
President