How Checkout.com supercharges payment performance for big retailers
An interview with Antoine Nougué
The world of payments is changing — and fast. As more of us shop online, businesses are trying to break down barriers to making payments and purchases online. The goal is to improve payment performance, and utilize the role of payments as a strategic tool for growth.
To do that requires an enormous amount of expertise, as Antoine Nougué, head of commercial at Checkout.com — which is approaching a decade in business — explains.
How did Checkout.com come about, and what does it seek to do?
Our founder and CEO, Guillaume Pousaz, created the company because he believes that complexity is a barrier to global economic prosperity. Payments is at the heart of this and has been traditionally a very complex industry with many legacy layers and large cumbersome players who were not necessarily offering the best value to users and perhaps lacked the agility to see through the sorts of visions which would become increasingly important. Guillaume built Checkout.com to reduce complexity in the system and to democratize access to payments – with all the many ensuing benefits that would bring.
How has the world of retail changed in the last 10 years? And how has it changed in the last 18 months?
Ten years ago, the economy was just emerging from a major economic crisis. I think 10 years on, there is an interesting echo — history never repeats but rhymes — as we emerge from another major global crisis and can again look at the remarkable resilience of the sector. Of course, the fundamentals of today's crisis are very different and they have uniquely facilitated a turbocharged shift to digital and to ecommerce. You could say that digital has, this time, been absolutely at the core of the sector's resilience and recovery. But even looking back to 10 years ago, digital and ecommerce were already really hot topics for the industry and were viewed as key growth areas.
In 2011, Cyber Monday sales amounted to $1.25 billion, which at the time was the all-time record. In comparison, analytics from Adobe show that in 2020 Cyber Monday brought in $10.8 billion in online spending in the US. In 2011 in China, consumers spent 2.5 hours per day online. This figure now stands at 5.5 hours per day.
In countries such as India, Pakistan and much of MENA, retail merchants were innovating with cash on delivery as a means of enabling ecommerce in cash-centric societies. Today our own research at Checkout.com shows that cash on delivery is on the decline in these regions with 80% reduction in cash use since the start of the pandemic, and 13 million people in Pakistan alone have shifted from preferring cash on delivery to now preferring a digital payment in the last 12 months.
One thing we have been looking at carefully is the degree to which the changes of the past 18 months will stick. From a consumer perspective we saw that in 2019 around 60% of Europe's population had shopped online and by 2021 more than 90% had done so — of whom 73% said they had no intention of significantly reducing their online shopping as vaccines are rolled out and stay-at-home orders are lifted. In the past 18 months our data shows that retailers have not only been investing hugely in their online presence but also in cross-border capabilities — from payments to shipping and fulfilment. These sorts of investments are really interesting because they change the course for the near future quite rapidly and radically.
How much more important has the role of payments become not just as a way to broker transactions, but as a customer retention process?
Payments have always been important for customer retention (the experience of handing over money for goods is important to consumers and needs to be easy, enjoyable and completely trustworthy), but what has happened is that some key players have truly recognized and embraced this fact, have thrown brains and resources into it and have utterly upped the game for everybody else.
Our own research with Oxford Economics shows that consumers in Europe, the U.K. and the U.S. are all willing to pay more for products when they are rewarded by the ease and speed of one-click payments. We are also seeing an increasing number of merchants moving toward, and nudging their customers toward, subscription models — and why wouldn't you?
In what way does Checkout.com help that happen?
Checkout.com is a technology company. We are first and foremost an army of engineers who are constantly building new solutions. It is one of our fundamental principles that we have always built for our merchants — taking real use cases and working to solve real challenges, taking into account the unique nature of every business we serve. For us it's really about flexing to the customer rather than imposing rigid vendor lock-in.
Why do only certain payments providers give businesses full access to payments data?
Most PSPs simply are not built to create the level of transparency which our tech provides. We have consciously worked toward building a tech stack with data at its core, and that takes work. Not only this, but the simplicity of our single API makes the data accessible and easy to integrate into our merchant businesses. So it's not a case of other providers being secretive with data, but simply that we have made the ability to see this data a priority because we believe it's the real key to unlocking even better performance.
What kind of companies does Checkout.com work with, and how has it helped their performance?
We serve companies that make or take payments online. We serve the best organizations that are looking to scale their business - such as Farfetch, Deliveroo and The Hut Group. We do this by providing flexible payment solutions so they can adapt to their business needs. We also provide access to data and actionable insights with a dedicated local team of experts that partner to help unlock more value from their payments and capture more revenue at every transaction. For customers such as Wise, using Checkout.com has allowed them to increase their turnover by several millions of dollars every month.
Which data points should businesses be looking out for, and how do they diagnose declines to unlock better performance?
There are two crucial data points. Authorization rates — these tell businesses how many payments are authorized — and response codes — these tell businesses why their payments are or aren't authorized.
Most businesses will track their top-line authorization rate — sometimes also referred to as an approval rate. It shows how many payments are authorized successfully once payment is initiated at the checkout. And it's a vital metric for organizations to monitor because its rise and fall directly impacts revenue.
Authorization rates also provide an indication of the experience a customer is having. A surprisingly low authorization rate may indicate that legitimate customers are having payments wrongly rejected. This is what's known as a false decline. And they cost businesses billions of dollars every year in lost revenue, making them one of the most expensive mistakes a business can make.
Although the top-line authorization rate is a good number to measure performance holistically, it's not an especially useful data point for spotting trends and patterns that can drive actionable performance improvements.
On response codes, there are many reasons that cause a payment to fail. And response codes are what tell businesses the reasons why. These are generated every time a transaction is approved or rejected by an issuing bank.
Response codes are extremely powerful data points to have access to. Without them, it's near impossible to understand why some payments are failing and take immediate action. This often leads businesses to make mistakes such as failing to retry the payment quickly enough or retrying too often and creating additional issues and costs.
Yet, unfortunately, many businesses are working in the dark. Our research finds 65% don't receive detailed raw response codes on failed payments.
Download Checkout.com's guide to uncover how to improve your authorization rates through granular data and the right payments partner.