Revenue Optimization 1: Authorization rates, fraud and some things you should know about risk management
Payments managers around the world have lost plenty of sleep over PSD2. Since 2015, when the payments directive was implemented, payments teams have spent hours sweating over the diverse details. Fast forward to 2019, and some companies have started to view PSD2 regulation and other regulatory changes as an opportunity. One such company is Spreadshirt, a global platform for personalized clothing and accessories who took the proactive approach to payments and changes in Europe when it comes to regulation.
“I was a bit scared that it could turn into a legislation that just kills a lot of ecommerce simply by not understanding it.”
Spreadshirt's growth has been electric. It grew from just a handful of employees in 2002 to more than 500 in 2019, with over $120 million revenue globally. But its payments strategy was not top of mind, to say the least. Then a sticking point came, in 2016 when, “... we realized that over the years a lot of different tasks related to payments were scattered across the company.” And that it’s “not just another thing that needs to ‘work’ somehow but, a way to provide our customers with a seamless and easy experience.” Henning says.
This was already a great sign that this fast-growing company was thinking ahead and wanted to understand payments on a completely different level. They decided to concentrate all the knowledge that was already there and created a dedicated Payment & Fraud team, which resulted in a much more consumer-centred approach. At Spreadshirt HQ, the team decided the best way to build a successful team was to think about what payment methods their customers want, how to increase their authorization rates and how best to deal with security.
Henning and his team were already looking into the PSD2 regulation over two years ago and it became clear that it was something to take seriously and learn about.
“There was a lot of uncertainty about how it will all unfold.” Not only that but there were concerns that it may have an impact on many businesses. “I was a bit scared that it could turn into a legislation that just kills a lot of ecommerce simply by not understanding it,” he says.
“... everyone was aware that there will be changes that need to happen.”
Henning’s team were ahead of the game due to their early awareness and learning from their GDPR experience, “The last time we had to put legislation into code was with GDPR and it turned out to have a lot of dependencies and became quite a challenge to be compliant before the deadline.” And we all are aware of the impression this legislation made to every business operating online.
His team started talking about and preparing for PSD2 quite early. Everyone knew there were changes coming, Schmidt says. "To be honest, I think that all scared us a bit...." he says.
The perception with PSD2 and adding any extra security to your payment flow is that it kills conversion. And everyone wants to obviously make the payment process as easy as possible for customers. Henning expressed his initial concerns, “... being forced to have strong customer authentication didn't sound good in the beginning.”
“... as the PSD2 will affect all merchants, that also motivated us to make Spreadshirt the company that has the best [strong customer authentication] solution in the industry.”
So to flip the script and turn a seemingly negative into a positive, Spreadshirt realised that “PSD2 will affect all merchants”, and wanted to be “the company that has the best solution in the industry.” So, the team here at Adyen were excited to hear that we could work together to help out with our 3DS2 implementation.
Together we collaborated on getting Spreadshirt ready for live transactions, even with the scope of the project as Henning explains, “With all integrations of this size you'll have some bumps in the road. It took a while to understand the issuer-initiated flows correctly and the documentation had some flaws in the beginning...” And as always we work hard to make sure everything is ready when going through such changes, “We were expecting much more difficulties and iterations before it would run smoothly.” he says.
“together with the Adyen engineers we were able to solve these issues and get it live in one sprint.”
Speed is fundamental to stay ahead in business, and the payments industry. This partnership helped us learn and adapt to their business quickly, which has been a great experience for us both, “... together with the Adyen engineers we were able to solve these issues and get it live in one sprint.” Moving fast really does pay off.
“... unless you have a lot of resources and expertise, get some strong partners to get it done.”
With the building blocks completed, Henning makes sure that they keep the customer at the centre before any mandated changes, “On the consumer side it doesn't change anything at the moment as we still don't enforce 3DS.” he says. Which means that they stay flexible and are prepared as only in September they “will start sending customers through 3DS 2.0 if the issuer wants us to do so.”
Even though Henning’s advice for companies currently assessing or gearing up for PSD2 is to “Hurry! Unless you have a lot of resources and expertise ...”, there is still time and there are many options to be ready for PSD2. And the best and quickest way Henning says, is to “get some strong partners to get it done.” As always we are here for our merchants and continue to build partnerships and grow together no matter what comes next.
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