There are a lot of elements you need to keep track of when it comes to running an online business. One of the most critical is controlling costs so that they don't eat into your profits and threaten your financial stability.
When it comes to billing and payments, there are a lot more costs to consider over and above the standard "sticker price." While it's important to compare how different options charge their direct fees, it's the ongoing hidden costs that you can incur that can add up quickly and hamper your growth.
One of the most important metrics to monitor is your chargeback rate. Chargebacks are when a customer compels their bank to reverse a charge on their credit card, usually because they suspect fraud. Chargebacks can be costly not only because you lose the money from the sale, you can also lose the merchandise and you will be charged a chargeback fee. On top of this, if your chargeback rate exceeds 1%, most payment processors will often suspend your account altogether.
Therefore, it's critical to implement steps to mitigate your chargeback risk and cost. Part of this is to have fraud prevention and analysis capabilities as part of your payment platform. The other way to reduce your risk of chargebacks is to have readily available customer billing support. If customers can ask questions about their purchase and, if needed, be given a full or partial refund, it can go a long way to bringing your chargeback costs to a minimum.
While all billing and payment options have stated costs, different fee structures are more suited for certain businesses. If you choose a solution with the wrong fee structure, you can end up paying more in the long run as you scale. In addition to transaction fees, many payment processors also charge monthly fees, set up fees, customization fees or fees for adding applications to your checkout.
So, while your upfront costs may seem lower with some options, your best results will likely be with a more customized checkout and payment experience that will increase conversions. Customization options are priced differently so you need to determine which model is most cost effective for what your business goals are.
There are also fees for compliance for regimes like PCI and data privacy. If you are in breach of any compliance rules, the fines can be steep.
Your staff are your most valuable resource. They ensure that your company delivers the value you promise to your customers. But if they have to spend time building and maintaining a secure payment solution in addition to handling any customer related billing issues, it diverts them from your core business.
This is another potential hidden cost, especially as you scale. More traffic and more transactions will bring with it more time-consuming demands like billing reconciliation and reporting, tax collection and remittance in a number of jurisdictions, fixing bugs when they arise and responding to customer billing inquiries. This is in addition to maintaining elements like security, numerous compliance agreements and checking for fraudulent transactions.
Perhaps the biggest hidden cost are the missed opportunities and sales with a billing and payment solution that is not optimized. There are many reasons cited by customers for backing out of a purchase that relate to billing and payments. Among the more significant reasons for abandoning a purchase, according to a survey by Baynard, include:
Clearly, your billing and payments solution can have a big impact on your sales and a poor checkout experience can cost you a number of opportunities. You could be losing out on huge international opportunities because you aren't displaying prices in local currencies or checkout pages in the right language. You may also be missing out on sales if you don't accept customer's preferred payment method which can vary by country or if their payment is unnecessarily declined.
Ensuring that every touchpoint with your customers is positive is extremely important to your success and this includes their billing and payment experience. It needs to be simple, easy and your checkout needs to inspire confidence in your company. It also needs to ensure that transactions are successful the first time.
Fortunately, these are all addressable issues with an optimized billing and payment solution which can lower the cost of missed opportunities.
Costs are not only about the visible sticker price. Businesses also need to think about what else they are giving up with their chosen billing and payment solution. You need to also incorporate the costs of your staff's time, including time they are not able to focus on your core service. There are also compliance or add-on fee costs to consider and, importantly, the cost of missed opportunities because of a bad checkout set up.
Thinking more strategically and in broader terms allows you to focus on what solution is truly the most cost-effective for your business.
[pardot-form id="10992" width="100%" height="280" title="Blog Form: 10 Reasons to Outsource Ecommerce"]
