By Galit Shani Michel, Head of Payments at Forter
Every day, businesses are watching potential customers reach their checkout and payment pages, fill their shopping carts, click through to the checkout page – and then simply vanish. What many don’t realise is that a significant portion of these vanishing shoppers isn’t due to them changing their minds of finding a better price elsewhere – it comes down to payment failures that could have been quite easily stopped.
In fact, payment dropouts are actually one of the most overlooked opportunities in digital commerce. While companies invest heavily in marketing to drive traffic and optimise their website product pages, they often miss investing in the very final step – where revenue is actually captured. And it’s causing a hidden drain on conversion rates that is wiping off millions in potential revenue.
A major cause of early checkout exits is poor payment authorization rates (the percentage of legitimate payment attempts that successfully get approved by the issuing bank). Authorization rates can be low because of fraud or insufficient funds, but there are many situations such as authentication failures or incorrect risk assessments where genuine customers see their valid cards declined, often multiple times, leading them to abandon their purchase altogether simply out of frustration.
The AI advantage to authorization rates
It goes without saying that the payments landscape has transformed dramatically. Not to mention that artificial intelligence is now offering merchants a greater ability to influence authorization rates. Advanced machine learning algorithms are able to analyse thousands of data points simultaneously. And this can include anything from transaction patterns, device fingerprinting to behavioural analytics. This data is helping merchants to make more nuanced decisions, and can even be shared with issuers to help influence them to authorize more legitimate transactions.
Unlike traditional legacy systems, AI-powered solutions can adjust their approach based on risk assessment, customer history, and other more personalised factors. This means fewer false declines of legitimate transactions while also ensuring stringent fraud protection. For retailers and merchants alike, this translates directly to improved authorization rates and reduced customer frustrations caused by pain points at the check-out.
The technology has now reached a level of maturity whereby it can tell the difference between actual suspicious activity and legitimate but perhaps more unusual purchasing behaviour. For example, a customer buying from a new location while abroad or travelling will no longer need to face an automatic decline if there are other factors showing the transaction is not fraudulent.
The opportunity lies in checkout personalisation
True personalisation goes beyond just showing and recognising the customer’s name. It involves presenting payment methods preferred in their region, showing prices in local currencies, offering differing shipping options to suit, and even adjusting the checkout flow based on the device type and past behaviour. A returning customer on mobile might see a streamlined one-click option, whereas a first-time buyer for example on desktop might receive more detailed information and trust signals.
Geographic personalisation too is also becoming really impactful. For example, a customer in Germany expects to see SEPA payments and Klarna options, whereas someone in Brazil might look for a different payment method like Boleto or PIX. When merchants match payment preferences to local expectations, friction experienced at checkout can be reduced significantly.
The digital wallet takeover
The way in which we as consumers pay for things has also changed dramatically – with 53% now using digital wallets more frequently than traditional payment methods. This isn’t just a trend amongst young people though, it’s becoming the standard across age groups as consumers lean towards greater convenience and security.
Digital wallets offer many benefits. Not only do they streamline the checkout process for customers while providing merchants with generally higher authorization rates – but they also leverage tokenisation and biometric authentication that reduces the risk of fraud and removes the need to manually enter payment details (which is quite a tedious process).
However, integration isn’t just about adding wallet buttons to your checkout page. The most successful payment implementations consider the entire user journey, ensuring that wallet options are presented at the most optimal moments possible and that the post-payment experience remains completely seamless.
Don’t just focus on quick fixes
The most successful approach to optimising payment processes involves viewing payments as an integrated part of the customer experience rather than merely a tech integration at the very end of the funnel. This means thinking about payment optimisation from the very moment a potential or repeat customer lands on your site.
Analysing payment data is also really benefiting business insights. Recognising patterns in payment data can reveal important customer segments, potential geographic opportunities – and highlight potentially serious drop-off points in the customer journey where revenue is being lost. Preferred payment methods can also help to guide market expansion strategies and partnership opportunities.
The businesses that recognise payments not as an additional cost, but as a revenue generator will be the ones to succeed because ultimately every failed transaction represents not just a lost sale, but a lost relationship. In a world where customer acquisition costs are only continuing to rise, improving the final step of the purchase journey offers one of the most important ROI opportunities available.
