Big Three: How Choice, Confidence and Convenience Drive Payments Optimization

As the digital transformation evolves, payments optimization has become the ultimate test for businesses striving to maintain a competitive edge. Companies are seeking the perfect balance in their payment processes to maximize both revenue and consumer engagement. Even small adjustments to payment processes can punch far above their weight, potentially leading to new customer acquisition, enhanced customer satisfaction and back-end savings.

When it comes to optimizing payments, certain attributes are more effective than others. They boil down to a simple mnemonic: Choice, confidence and convenience are the three main prerequisites of any payments optimization initiative.

Choice Drives Customer Engagement

Confidence in Security Is Paramount

Convenience Improves Customer Experience

Payments Optimization: Deploying the Three C’s

Choice Drives Customer Engagement

Customers pay in countless ways around the world, but they all want to pay in a manner that is familiar to them. Ensuring that customers have their choice of payment options is a key driver of customer loyalty.

Payment choice is a top priority for consumers when selecting online merchants.

PYMNTS Intelligence research found that for 70% of consumers, the availability of their preferred payment method is highly influential on their choice of where to make online purchases. Consumers find that online marketplaces offer better payment options than brand websites, with 53% of shoppers saying marketplaces are the best online option for their preferred payment methods, compared to just 22% for brand websites. Brand sites’ lack of payment flexibility, in fact, may contribute to higher rates of cart abandonment. Brands’ websites recorded an average of eight cart abandonments in the last 30 days, compared to seven on marketplaces’ websites.

70%

of consumers consider the availability of their preferred payment method very or extremely influential when choosing a merchant.

These statistics underscore the importance of offering customers an optimal choice of payment methods. If their favorite option is unavailable at a given merchant, they are likely to stop shopping there.

Offering payment choice can help SMBs win customer loyalty.

Although big-box stores can typically offer better deals than smaller competitors, 78% of consumers are willing to pay more to support small to mid-sized businesses (SMBs).

That is the finding of a recent survey. However, there is a caveat: To attract these customers, SMBs must offer their preferred payment methods. According to the survey, 42% of Generation Z and 29% of millennials view flexible payment options — including contactless payments and mobile wallets — as a powerful draw. What’s more, consumers said these options are a significant factor in deciding where to shop. Providing these payment choices will be imperative for businesses both large and small aiming to optimize their payments.

Confidence in Security Is Paramount

To protect both customers and business interests, corporates must prioritize robust anti-fraud measures — while avoiding false declines.

To gain customer confidence, strong payment security measures are a must.

82%

of eCommerce merchants experienced cyber or data breaches in the past year.

Payment fraud poses a critical risk that can significantly impact customer retention and overall business viability. PYMNTS Intelligence research found that 82% of United States-based eCommerce merchants with international sales experienced cyber or data breaches in the past year. Breaches can have direct financial consequences, with 47% of businesses reporting the loss of customers and revenue due to fraud. These incidents also diminish customer satisfaction, as reported by 68% of merchants. High-profile security breaches can result in long-lasting reputational damage that extends beyond immediate financial losses.

These growing hazards make security paramount to winning consumer confidence. Implementing anti-fraud technologies such as two-factor authentication has proven highly effective in improving customer experiences, with 93% of merchants reporting positive outcomes. Eighty-two percent of merchants say increased consumer satisfaction is a key benefit of updating their anti-fraud tool kits, with 21% considering it the single most significant advantage to this investment. Other perceived benefits include eliminating customer concerns about data privacy (68%), preventing customer loss due to fraud (54%), avoiding revenue loss from fraudulent activities (37%) and increasing profitability (21%). Ensuring consumer confidence through security is essential for payments optimization.

However, finding the right balance in fraud detection is also vital — especially to avoid false declines.

Confidence, it turns out, has more than one facet. Merchants clearly need robust payment security measures to protect their finances and reputations, but the right level of vigilance is also key to maintaining consumer trust. While fraud detection algorithms are growing increasingly effective at stopping bad actors, they may err on the side of caution, resulting in false declines. In the past year, 18% of consumers experienced a false decline. Seventy percent reported the frequency of these incidents as either unchanged or higher compared to the previous year.

This loss of legitimate transactions can have severe consequences for businesses’ bottom lines. Forty-one percent of consumers say they will never patronize a brand again after experiencing a false decline. A company’s reputation can also suffer, with 34% of affected consumers complaining about these experiences on social media. Such impacts highlight the need for businesses to balance fraud prevention with providing a smooth customer experience to avoid losing revenue and tarnishing a brand’s image. That brings us to the third “C”: convenience.

Convenience Improves Customer Experience

Consumers flock to merchants that offer them the most convenient and seamless transactions, making these qualities pivotal to payments optimization.

Convenience is the top driver for customers in selecting where to shop.

In a recent survey, 51% of shoppers said convenience is either the most or second-most important factor in choosing their preferred shopping channel. This largely applies to online marketplaces, with convenience driving marketplace popularity for 58% of consumers. In addition, 18% of respondents opt for channels that offer one-click payment options, and 84% believe having this specific convenience is important. Convenience also plays a role in in-store shopping, with 44% of consumers mentioning it as a motivating factor.

51%

of shoppers say convenience is a top factor when choosing a merchant.

Refunds and returns need to be just as convenient as purchases.

Convenience, moreover, does not apply merely to purchases. Ninety-six percent of customers surveyed said easy refunds and returns are crucial as well. Inefficient payment disbursement can quickly erode trust and potentially damage long-term customer relationships.

To this end, Worldpay recently introduced a new service aimed at delivering near-instant refunds to customers. The new capability is available to most shoppers in the United Kingdom using Mastercard and Visa cards when buying from participating retailers. Consumers who make eligible returns can get near-instant refunds when returning items for online purchases.

“With the right approach, the refund process can be transformed from a pain point for merchants into a tool to drive loyalty,” Tom Essenhigh, VP of Retail & Hospitality at Worldpay, told PYMNTS Intelligence. “Shoppers greatly value a fast and painless refund, and it can be the differentiator that leads to them shopping with that retailer time and again. Don’t underestimate how giving back effectively increases future sales.”

Perks and rewards are also key components of customer convenience.

Perks like free shipping are vital for attracting customers, with two-thirds of consumers considering this feature important for loyalty. However, attention to perks is especially important for reaching younger consumers like Gen Zers, who say they are bored with traditional rewards structures. Instead, they prefer more innovative perks. In response to a recent PYMNTS Intelligence survey, three out of five members of Gen Z said they enjoy access to flash sales or events, versus older consumers’ preference for cash-back rewards. These younger shoppers also prefer merchants to deliver their rewards via app instead of mail or in-store offers.

Merchants and banks should take special note of Gen Z’s rewards preferences, as their relationship with these consumers could last decades. Getting ahead of the rewards curve now could reap long-term benefits as young consumers’ loyalties become more entrenched.

Payments Optimization: Deploying the Three C’s

Choice, confidence and convenience make up the key criteria for businesses looking to optimize their payment operations. Choice is crucial, as customers expect a variety of payment methods, omnichannel shopping experiences and local payment options. By offering diverse payment choices, businesses can cater to different customer preferences, increase conversion rates and expand their reach across global markets. Additionally, providing local payment options can significantly boost customer satisfaction and loyalty abroad.

Similarly, confidence in payment security and fraud prevention is paramount for both businesses and customers. However, security must be balanced to avoid declines of legitimate transactions. By establishing security that is both strong enough to prevent fraud and sensitive enough to avoid false declines, businesses can boost customer confidence and long-term loyalty to protect their revenue and avoid reputational damage.

Convenience, the third critical payments attribute, encompasses not just frictionless transactions but also perks and rewards. With the majority of shoppers citing convenience as the top driver for selecting their preferred shopping channels, prioritizing smooth, efficient payment processes is nonnegotiable for businesses.

Minding the three C’s will ensure businesses’ successful payments optimization to meet the evolving demands of modern consumers.

Shoppers increasingly expect the triumvirate of convenience, confidence and choice when deciding where to spend their money. Doing just one of these well is no longer enough. Choice in how to pay, the speed and convenience of purchasing and receiving goods, easy refunds and secure environments all play a part in keeping shoppers choosing one retailer over another.”

Tom Essenhigh
VP, Retail & Hospitality