Overcoming the Challenges of Backend Payment Processing

Most car owners choose their mechanics carefully. They may have developed a working relationship with them over years or even decades – built on mutual trust and the understanding that they have the car owner’s best interests at heart. Similarly, online merchants should pick their payment processor with care. They should know that there’s more to success than the shiny exterior of a checkout experience.

PayPal takes care of a whole stack of back-end payment processing to deliver for its customers. Let’s take a look under the hood.

The challenges of enterprise payment processing

Picking the right payments processor is no easy task. Most online business owners know only too well the challenges they face from increasingly sophisticated fraudsters, falling authorization rates, and surging dispute volumes. Most importantly, they must tackle these back-end challenges without impacting the front-end customer experience. For example, tighten fraud filters too much and they may block legitimate transactions, impacting customer loyalty and sales.

Here are some challenges merchants face:

Authorization rates: The key to driving revenue is to increase authorization rates with issuers. But too often transactions are declined for various reasons. It could be due to insufficient funds, configuration, or transaction format errors, expired payment card details, or because fraud checks have incorrectly flagged suspicious activity. According to a 2022 Ponemon Institute study, 56% of organizations say their customers have frequently experienced at least one of their transactions being declined.¹ Organizations need a payment provider who understands the authorization process inside and out and has extensive relationships across the payment ecosystem, and who can deliver the right data in the right format to increase issuer confidence.

Fraud: Merchants lose an average of $3.7M annually due to fraudulent online transactions, according to a recent study conducted by the Ponemon Institute, sponsored by PayPal.² The bad guys often have the upper hand in terms of anonymizing and automated tooling and may have access to large volumes of breached customer information. When fraudsters succeed, merchants loses not only a potential sale, but they also have to reimburse the defrauded customer via a chargeback payment. Unfortunately, legacy rules-based solutions rarely outwit sophisticated fraudsters. Merchants need a more intelligent and automated way to drive fraud prevention.

Transaction disputes: Customers can file a dispute to try and reclaim funds if an item didn’t arrive, or if it was damaged in some way. But it’s become so easy to file these disputes that merchants risk becoming overwhelmed. Many are unable to accurately assess if a dispute is fraudulent due to limited resources. Failing to file a response means merchant lose. It could all add up to a significant administrative and financial burden.

Customer experience: Shoppers might leave a site without paying for several reasons. Research reveals that 59% of organizations say their customers have frequently abandoned a shopping cart when their preferred payment is unavailable.³ Even if they checkout, consumers may find their transaction declined due to potential fraud or expired card details. Ensuring the shopping experience is seamless for the customer is a vital step to driving successful enterprise payment processing.

How to tackle back-end payment processing challenges and prevent falling authorization rates

PayPal brings over two decades of experience to the table. This deep experience helps to prevent the bad things – like fraud, false declines and latency – and optimize the good stuff like authorization rates. That’s the way to help generate more revenue and keep customers coming back. Specifically, PayPal enables merchants to:

Increase authorization rates with Smart Retries, Smart Routing, Account Updater, and Network Tokenization. Tokenization and account updates minimize the chance that a card will be declined due to expired or old information.

Orchestrate payments to help increase resilience, reduce operational complexity, and support global expansion. PayPal offers full-stack processing through a single integration, to support 130+ currencies in 50 countries.

Mitigate risk with security, compliance, and fraud and risk management tools. Machine learning algorithms help pot fraud patterns an analyst may miss and update filters to ensure they’re always optimized.

Streamline operations with dispute automation, reporting insights, and enterprise admin approvals. Automating disputes helps merchants respond with ease to disputes, driving success rates without incurring significant extra admin costs.

Improve the customer experience by supporting popular payment methods like PayPal, Venmo, ACH Direct Debit, UnionPay, digital wallets, credit and debit at checkout.

Want to learn more about how to optimizing authorization rates? Read about optimizing auth rates to drive revenue and check out Authorization Rates Explained by PayPal.

Optimizing your checkout experience can help boost conversion, drive revenue and improve customer experience. To find out how PayPal can help, visit enterprise payment solutions.