The three tenets of our CashBox solution are 1) to increase customer acquisition, 2) maximize customer retention, and 3) enable operational excellence for online merchants that sell digital goods & services to consumers and small business (SMB).
Acquisition is straightforward – allow consumers to choose the right product / plan at the right price in the correct language and currency, and to pay in their payment method of choice.
Operational excellence around billing and customer information is also obvious – securely store all sensitive data while managing and nurturing the overall customer relationship (PCI DSS & SOX are methods of enforcing parts of this).
Where the waters get a bit murky for some folks is customer retention…
The concept is simple. If a transaction fails, try it again, and again, and again. However, retention involves multiple moving parts, so every little detail matters and the compound effect of many small tweaks can be quite large. Some factors that make an impact on retention include:
- Failure type
- System availability
- Transaction type (one-time, subscription, etc)
- Time since last billing
- Time between retries
- Number of retries
- Payment processor used
- Transaction routing (# of stops along the way)
Many of these factors are specific to the business model used (Time between billings, transaction type) and some are the result of merchant preference (time between retries, number of retries). Yet others are system related (payment processor, transaction routing, system availability). While the first two areas can experience continual improvement with testing and optimization, the system related issues are *somewhat*out of control of the merchant. The *somewhat* refers to the fact that merchants have a choice of business partners.
Let’s take a closer look at the three system-related factors listed and how we address them.
- System availability
- The uptime of connections to the payment processor from the gateway, and the connection from the payment processor to the Interchange.
- Vindicia: Part of our solution to this problem is a built-in gateway in order to eliminate uptime issues between the billing system and the payment processor. We also have hardware directly in the datacenters of certain partners with direct connections to further reduce any connectivity issues. As a final step, if the payment processor’s connection is down, we automatically queue the transactions for retry.
- Payment Processor
- The payment processor responsible for your online transactions plays a huge role in the overall transaction success (initial & retry).
- Vindicia: We gave a webinar on this topic a while ago (and wrote a white paper with one of our consulting partners [pdf]) to help merchants choose the best processor for their needs. The upside is that cost is only a small factor in the decision and service matters much more. To that end, we only work with the top processors with experience in online, digital commerce.
- Transaction Routing
- The number of systems involved in submitting a transaction makes a big difference. The typical flow would involve:
- Creating a transaction in the billing system
- Passing the transaction to a gateway
- Submitting the transaction to a payment processor
- Receiving information from the card network interchange
- Capturing the transaction (or other actions, depending on processor response)
- Vindicia: As mentioned above, we have combined the billing system and gateway (first three steps above) for more control over the transaction flow and greater payment success rates. This also gives more control over the retry logic by directly interpreting error codes from the payment processors into different retry flows. Billing companies & in-house systems that have not directly integrated to payment processors cannot compete with our results.
- The number of systems involved in submitting a transaction makes a big difference. The typical flow would involve:
I’ll save descriptions of the other factors for another post. Optimizing customer retention is goal with constantly moving goalposts. When embarking down the path, merchants have a choice of either becoming experts at payment networks and card retry logic or choosing a partner that is already an established leader in the space.
