E-commerce Experts Highlight Tokenization and 4 Checkout Mistakes Impacting Your Bottom Line

In today’s fast-paced digital era, e-commerce businesses are constantly striving to provide exceptional consumer-facing experiences. However, many enterprises still face challenges during and after checkout, such as false declines and fraud. These hurdles not only impact revenue but also damage a brand’s reputation.

To overcome these obstacles and ensure a seamless checkout experience, business leaders must invest in tools like tokenization to improve the backend processes. This article will explore four common checkout mistakes that enterprise e-commerce businesses make and provide strategies to avoid them.

Mistake #1: Neglecting to Protect Sensitive Customer Data

One of the businesses’ most significant responsibilities is keeping their customers’ data safe. With the rise in data breaches, consumers are becoming more concerned about the security of their personal information.

Failure to protect sensitive customer data can have severe consequences, including financial loss and reputational damage. To address this issue, enterprises should consider implementing vaulting and tokenization techniques.

Vaulting refers to securely storing shoppers’ card information for e-commerce

Vaulting refers to securely storing shoppers’ card information in a protected digital “vault.” This approach allows businesses to store payment details for future transactions safely. By utilizing vaulting, enterprises can offer features like one-click checkouts and subscriptions, enhancing the customer experience and potentially increasing revenue.

Tokenization is another effective method for protecting customer data. It involves replacing a customer’s sensitive payment information with a token at checkout. The token, which is merchant-specific and carries a one-time-use cryptogram, becomes useless if compromised by fraudsters. Implementing network tokenization in the enterprise payment system can reduce the risk of false declines and inaccuracies. It also decreases the likelihood of valid transactions being incorrectly flagged as fraud.

Mistake #2: Overlooking the Impact of False Declines and Neglecting Backend Payment Technology

False declines occur when the payment system mistakenly declines a legitimate transaction. This can frustrate customers and lead to abandoned purchases, resulting in lost revenue for e-commerce merchants. In fact, false declines cost businesses an estimated $11.1 billion last year. To avoid this mistake, enterprises need to strike the right balance between security and payment approvals.

Backend payment technology plays a crucial role in preventing false declines.

Predictive analytics solutions, powered by artificial intelligence (AI), can assess the risk level of each transaction. These machine-learning models can differentiate between legitimate and fraudulent transactions, reducing the occurrence of false declines. It’s essential to ensure the predictive analytics solution is trained on a dynamic dataset to maximize its effectiveness.

For instance, Naked Wines successfully addressed false declines by leveraging backend payment tech. After implementing PayPal Braintree and Fraud Protection Advanced, the wine retailer experienced a 5% increase in approvals. PayPal Braintree has also shown an increase in authorization rates by around four percentage points globally. By utilizing backend payment technology, businesses can have more control over fraud reduction and improve the customer checkout experience.

Mistake #3: Failing to Mitigate Fraud

In today’s economic climate, enterprises face the challenge of combating fraud, which tends to increase during economic uncertainty. Investing in technology to protect against fraud is crucial for e-commerce merchants. Payment tools not only facilitate seamless purchases but also help prevent fraudulent transactions from occurring.

Payment solutions, such as PayPal, offer features that drive good customers to merchants while minimizing the risk of fraudulent transactions. These solutions evaluate various factors, such as geography, transaction history, and device data, to assess the buyer’s authenticity and transaction. By leveraging payment tools, businesses can enhance the security of their checkout process and reduce the potential for fraud.

Mistake #4: Failure to Mitigate Costly Chargebacks

Even after the checkout process is complete, enterprises may still encounter challenges, such as chargebacks. A chargeback occurs when a customer disputes a transaction with their bank or credit card company, leading to a payment reversal. Chargebacks result in the loss of potential customers and are financially burdensome for merchants.

Mitigate the impact of chargebacks

To mitigate the impact of chargebacks, businesses can implement chargeback protection software. This software screens incoming transactions for fraudulent charges and helps companies gather transaction information to defend against chargeback disputes. By storing and tracking purchasing data, businesses can verify the legitimacy of customer requests for chargebacks, reducing financial loss.

Conclusion

To succeed in the competitive e-commerce landscape, enterprises must prioritize both the front-end and back-end processes of the checkout experience. Neglecting backend optimizations can lead to challenges such as false declines, fraud, and costly chargebacks.

Invest in secure data storage,

By investing in secure data storage, leveraging tokenization techniques, utilizing backend payment technology, mitigating fraud, and implementing chargeback protection software, businesses can improve the checkout experience, protect sensitive customer data, and ultimately drive successful business outcomes.

Remember, ensuring a seamless checkout experience is crucial for building customer loyalty and maintaining a positive brand reputation. By avoiding these common checkout mistakes, enterprises can provide exceptional experiences that keep customers returning for more.

FAQs

1. What is vaulting in the context of e-commerce?

   • Vaulting refers to securely storing shoppers’ card information in a digital “vault.” This technique allows businesses to store payment details for future transactions, providing convenience to customers and potentially increasing revenue.

2. How does tokenization enhance data security in e-commerce?

   • Tokenization replaces a customer’s sensitive payment information with a token at checkout. This token is merchant-specific and carries a one-time-use cryptogram, making it useless to fraudsters if compromised. Tokenization helps protect customer data, reduce false declines, and enhance the overall security of the checkout process.

3. What is the impact of false declines on e-commerce businesses?

   • False declines occur when the payment system mistakenly declines legitimate transactions. This can lead to frustration for customers and lost revenue for businesses. In fact, false declines cost e-commerce merchants an estimated $11.1 billion last year.

4. How can backend payment technology help reduce false declines?

   • Backend payment technology, powered by AI and predictive analytics, can accurately assess each transaction’s risk level. By distinguishing between legitimate and fraudulent transactions, backend payment technology can reduce false declines, improving the customer checkout experience and increasing revenue for businesses.

5. What is chargeback protection software, and how does it benefit businesses?

   • Chargeback protection software screens incoming transactions for fraudulent charges and helps businesses gather transaction information to defend against chargeback disputes. By storing and tracking purchasing data, businesses can verify the legitimacy of customer requests for chargebacks, reducing financial loss and mitigating the impact of chargebacks.

First reported on Business Insider
Featured Image Credit: Photo by Bruno Kelzer; Unsplash; Thank you!