TopicsGuides Optimize payments Online payments Payment methods Revenue protect In-person payments Authentication
In a challenging global economy, digital businesses prioritize cost reduction and scrutinize operations to safeguard profits.
Rising inflation in the past year has made companies cautious about investing in growth, given smaller profit margins. To cope with these challenges, companies are reevaluating their Cost of Payments (CoP) as a smart strategy. To do this effectively, businesses need to identify and understand each component of the overall CoP. This knowledge will enable them to make informed cost-cutting decisions that won’t backfire.
In this article, we’ll explore how improving payment knowledge can help streamline processes, reduce CoP, and boost business growth despite economic difficulties.
Reducing the CoP without sacrificing performance
Navigating the intricate world of payment optimization is already complex. However, maximizing authorization rates while inserting a cost reduction variable into the equation becomes daunting. Challenges arise due to complicated fees and ambiguous reporting, especially when multiple parties are involved in the payment process. This complexity drives up costs.
Consider your payments ecosystem
How many parties are involved in helping your customers pay for your products and services? How many contracts do you need to manage? How many negotiations are required to impact your costs?
Typically, enterprises involve more than 10 intermediaries in processing their payments. This number is when a business expands overseas, leading to higher costs.
Strive to eliminate unnecessary intermediaries, as each stakeholder seeks a portion of the profits. Streamlining the process can help retain more revenue.
Adyen can simplify your global payment operations, eliminating costly intermediaries through a comprehensive end-to-end solution, from risk management to funding settlements, payouts, and embedded financial services. Minimizing risk and boosting efficiency translates into cost savings.
Our single platform simplifies the traditional payment value chain and allows Adyen to deliver outstanding performance. By eliminating third parties, we minimize the risk for ‘weak links' to compromise the chain, and we can keep speed and efficiency.
Analyze your Cost of Payments
Understanding your total CoP is crucial. To do this, break down the various components that make up your monthly expenses for processing payments.
Fraud: includes fraud management system, chargebacks, reputational damage.
PSP service: covers processing, acquiring, settlement, payouts, reporting.
Scheme fees and interchange fees.
Foreign Exchange (FX).
Authentication Costs: Include expenses associated with authentication processes, such as 3D Secure or other verification methods.
Operations (includes reconciliation, dunning, manual order review, etc).
This exercise can be eased when working with partners that operate transparently and provide analytics tools to gain a clear understanding of where expenses occur.
Adyen provides detailed transaction reporting, consolidating data from multiple sources, offering real-time and predictive analytics.
This provides businesses with a detailed grasp of their payment-related costs, helping them uncover hidden expenses and efficiently manage their spending.
This clarity enables informed decision-making, allowing businesses to optimize payment processes, reduce unnecessary costs, and enhance financial control.
Discover our powerful reporting tools.
Rank your efforts
Digital businesses’ highest costs typically come from card processing and fraud. Focusing on these areas can yield satisfactory results.
Unraveling Scheme and Interchange fees
Scheme and Interchange fees lie at the core of digital payment costs, which are often overlooked. Have you truly grasped their impact on your expenses?
Can your business influence these costs? Absolutely. But it's only sometimes straightforward, especially with the right expertise. That's where Adyen steps in – to simplify this complexity, trim unnecessary card-related fees, and optimize your payment strategy.
Qualify for lower Interchange fees in non-regulated regions like the US
In the US, where interchange fees remain uncapped (whereas regulated debit is capped), card payments can be excessively costly. Transactions with sufficient data carry less risk, reducing interchange fees compared to transactions with limited card information. Understanding which data reduces risk can help you secure lower Interchange fees.
Adyen advises on data inclusion in payment requests, such as billing zip codes, sales tax amounts, or line item descriptions, enabling you to benefit from reduced interchange rates. You can cut interchange fees by up to 1% for US domestic Visa and Mastercard transactions by getting it right.
Optimize payment mix: Find the sweet spot
Revise your payment methods to include cost-effective alternatives to cards without compromising customer experience and approval rates.
Integrating multiple payment methods enhances convenience and transaction success.
However, managing various payment systems can often result in unforeseen expenses and complexities. Adyen's unified platform offers a streamlined integration process, effectively minimizing hidden costs and simplifying the management of more than *200+ payment methods.
We can advise on shoppers’ preferences and local regulations and help you bypass expensive credit card rates.
*Adyen supports all of the key payment methods anywhere in the world.
Ecommerce fraud expenses are soaring, projected to surpass $48 billion globally in 2023, according to Juniper Research. Adyen RevenueProtect is your key to tackling this challenge, countering various fraud types—chargebacks, card testing, phishing, identity theft, and reputation damage—significantly impacting your CoP.
Finding the right balance in fraud settings is critical. If settings are too strict you risk rejecting legitimate customers, while overly lenient ones expose you to fraud risks and costly investigations. Partnering with Adyen, a global payments service provider, is your solution.
Consider Strong Customer Authentication, even where not mandated by regulators (like Europe). Adyen's Authentication Engine leverages machine learning to maximize approval rates, ensuring security and seamless shopper experiences.
Learn more about authentication
Explore network tokens
Enhance your card-on-file payments with network tokens, offering improved security. Adyen's network token optimization integrates this technology into our single-platform solution. The biggest value, however, lies in achieving higher authorization rates and reducing fees, which is particularly relevant for enterprise merchants.
Our dynamic system decides whether to use a token or a PAN based on issuer preferences, driven by machine learning and tested with data from leading ecommerce businesses.
The best part? You can start using network tokens and optimization with your existing payment integration, potentially reducing your overall CoP.
FX and exchange fees
When it comes to managing currency conversion, businesses that operate across borders often experience scalability issues and incur unnecessary FX costs as a result of inefficient setups.
Adyen offers merchants a smart and scalable FX solution that helps them reduce FX costs.
Adyen settles merchants "like for like" in 32 currencies, offering all major legal tenders as settlement currencies. A like-for-like settlement means the transaction currency equals the merchant settlement currency, so no conversion occurs. Merchants can control their own FX processes and avoid unnecessary FX charges.
Merchants have a valuable opportunity to significantly reduce their Cost of Payment (CoP) by implementing the practices outlined above in the article. Integrating multiple payment methods, managing fluctuating transaction fees, and adopting local acquiring strategies streamline processes, reduce expenses, and foster growth.
Payment optimization proves to be indispensable in ensuring effortless online payments while minimizing costs, ultimately revealing untapped potential within business operations.