Connected commerce is among the hottest trends in retail, and not just for streaming or ridesharing or online gaming services, but for subscription purchases, too. In fact, according to new PYMNTS research, digital services are expanding in the United States and in markets around the world. Providers are now working to make customer experiences more contextual, finding users wherever they spend their time — through car dashboards, on mobile apps or via other devices.
But none of that can work well without payments, as Chris Abele, product strategy lead for First Data’s digital commerce solutions, recently told Karen Webster in a conversation based on the new PYMNTS and First Data Commerce Connected Playbook. He provided this statistic, in considering the payment challenges of all those rising areas of commerce: Among one-time, card present transactions, 90 percent or more are typically approved on the first try. For those online transactions that rely on cards on file to complete recurring payments, however, that figure tends to drop to the 60 percent range on average, he said.
Growth and Complexity
“There are a lot of different complexities when you are growing as rapidly as some of these digital services companies,” Abele noted.
Some of the companies described by the Commerce Connected Playbook are going public, for instance, with rideshare providers specifically headed toward long-anticipated initial public offerings. Meanwhile, other companies in the space are going global at a rapid clip. No matter what, all companies in this space face the challenge of providing reliable, secure and seamless transactions to consumers, lest they grow impatient or distrustful of the commerce operator and jump ship.
As that PYMNTS report notes, streaming services companies are integrating payments into their platforms as they expand to new markets. They’re also tailoring content to the mobile devices that are taking a more central role in entertainment, bill payment and consumer transportation needs, among other daily functions. Consumers are using said devices to order food from delivery services like Grubhub or Seamless, get help setting up their IKEA bookcases via TaskRabbit and subscribe to new car plans — all with just a few taps.
Payments is serving as the common thread in this commerce-connected world — but it has to be done right. The questions commerce providers face, Abele told Webster, come down to “How do I make sure the credit cards I have are secure, and how do I make sure the authorization rates are as high as possible?”
Think of that drop-off in authorization rates as described above — that 90 percent figure versus the one that can fall as low as 60 percent. There are various reasons behind that drop: Payment cards kept on file can expire and not get quickly renewed, or consumers might have their cards stolen and then replaced. That all happens “time and again,” he said, “and ultimately can result in lower authorization rates for merchants.”
Best practices about how to combat those rates and protect against fraud and chargebacks are still emerging. “We are in the second or third inning of resolving this,” Abele said during the PYMNTS interview.
Commerce providers, for starters, need to make sure their anti-fraud and chargeback systems are up to snuff. And they need to find ways to best communicate with their customers in a manner that will gain positive attention and not annoy customers or lead to messages being ignored. As both Abele and Webster pointed out, the screens of consumers’ smartphones are often cluttered with text messages, email reminders and other notes, increasing the odds that a notice about an expired card might be ignored, which in turn impacts that service and the revenue the commerce provider will receive.
As well, commerce providers experiencing or planning on growth — and who isn’t? — need to do their homework on how best to integrate payments into the commerce offering. Doing so with an online game, for instance, might require different steps than doing so for a rideshare offering.
That’s hardly all — cross-border payments and international expansions also bring their own significant difficulties in regard to new payment methods and associated issues. “Your authorization rates can truly suffer, and can get down into the 40s,” Abele said. “You are really struggling to create not only a good consumer experience, but also to manage your revenue.”
That said, commerce providers that not only understand and play well with local regulations — such as India’s localization rules for eCommerce — and can successfully integrate new payment methods into their platforms without decreasing authorization rates can really find an edge.
Those are among the emerging best practices in these newer and rising areas of online commerce — which will continue to grow as more consumers embrace digital and mobile methods of retail, but will present challenges when it comes to payments.