Large-scale digital businesses from retail to food delivery services are expanding into new markets and channels, offering enhanced payment experiences with offerings like personalized checkouts and the ability to accept local payment methods. As they grow, these merchants must contend with risks like fraud, high transaction fees and the burden of maintaining outdated systems that can impact returns from new sources of growth.
The bright side: Businesses can slash payment transaction costs by leveraging advanced technology that harnesses AI and machine learning to optimize everything from payment routing to fraud detection. Leading payments provider Adyen analyzed the top 100 global businesses on its platform, finding clear evidence that the right strategies can reduce costs and increase revenue at scale. For example, these businesses collectively experienced $7.55 billion in incremental revenue over 12 months by using network tokens, a payment authentication technique that reduces fraud by eliminating the need for merchants to handle or store credit card numbers themselves.
With insights from Adyen's report, we'll explore four key benefits to companies that employ next-gen payment technologies that reduce costs and drive profitability and growth.
High transaction fees, often driven by cross-border processing costs, cut into revenue for businesses. By processing transactions domestically, merchants can achieve an average savings of 59% per transaction, offering a sizable benefit to those operating internationally. Setting up local entities or partnering with local card acquirers can be unwieldy without the right connections, making it crucial to work with a partner that has local acquiring licenses in all major markets.
Offering local payment methods does more than just boost conversion; it can be up to 49% cheaper than cards, based on Adyen's data. Adyen found that its top 100 businesses saved $201 million over 12 months by routing some of their payment traffic locally.
Interchange and scheme fees vary by region and fluctuate frequently. Thanks to updated regulations, all debit cards issued in the U.S. must be branded by at least one additional unaffiliated network, adding more complexities for businesses. However, this same complexity creates a unique advantage: Adyen offers the only AI-based payment routing solution that optimizes for cost, acceptance and speed by determining the optimal network to route the transaction through. In a pilot of more than 20 major enterprise merchants, Adyen achieved an average of 26% cost savings and a 0.22% uplift in authorization rates.
Adyen can also help businesses send more data with each transaction to help issuers assess risk and reduce fraud, saving up to 16.5% in scheme fees. The report found that Adyen's top 100 businesses saved nearly $72 million in scheme fees in the last 12 months with Enhanced Scheme Data, which is optional data that businesses can send with a payment or capture request.
Network tokens are a payments breakthrough, improving payment acceptance, reducing fees, increasing security and reducing the compliance burden on merchants. Customer details are authenticated during the first transaction and replaced by an encrypted token used for subsequent transactions. Adyen data found that the companies using tokens strategically saw a 6% higher acceptance rate, gaining over $7.5 billion in added revenue over 12 months.
In addition to providing network tokens to avoid card expire failure, Adyen also offers an account updater. The product automatically checks for updated card details when it's time for a recurring payment. The platform's top 100 businesses saved more than $1 billion over 12 months through such automatic account data updates.
When it comes to preventing fraud, businesses still inadvertently block good shoppers when weeding out bad actors. Risk tools that use data and machine learning are helping businesses separate legitimate customers from fraudsters. A study conducted on behalf of Adyen found that enterprises can reduce chargeback write-off rates by 27% and false positive declines by 40% on average on its platform.
Online and offline channels are merging. Retailers are using smart strategies that bring them closer to their customers, such as digital retailers hosting pop-up stores and in-person events. And integrating online and offline channels on the backend is leading to innovations like Pay by Link, which allows customers to complete purchases during a phone call or video consultation without the need to produce a physical card.
Reducing queues is essential to delivering optimal in-person payment experiences. Retailers are employing innovations like Tap to Pay, which lets employees accept payments anywhere in the store using almost any device. And a payment terminal function called store-and-forward keeps them functioning through network outages, automatically 'catching up' on transactions when the network connection is restored.
By choosing Adyen as its unified payments partner, one world-famous sports team has prepared for busy match days with mobile checkout and faster transaction times. As it expands merchandise sales to over 200 countries, it can also accept local payment methods in more locations, and save on transaction fees. Perhaps more important is the in-stadium fan experience where shortening transaction times allows more guests to be served during breaks in the game.
Many businesses are still working with legacy payment systems that force them into laborious manual reconciliation processes. Integrating all payments across channels and regions on a single platform helps automate the process and gets merchants paid faster. Adyen's unified platform helps businesses quickly pull in-depth reports and even pay out a full sales day all at once, regardless of whether Adyen has received the funds.
Having a unified platform also greatly speeds up the launch of new payment methods. A study conducted on behalf of Adyen found that large businesses launching in new markets reduced operational overhead by 75% by working with the platform. The Adyen API helps developers build innovative payment experiences quickly with the help of clear documentation and a thriving developer community.
In addition to easy integration, Adyen takes extensive measures to prepare for unexpected outages, such as setting up redundant data centers and avoiding third-party dependency.
Payments innovation is moving fast, with newer methods gaining rapid popularity. Having the right advanced technology on an integrated platform ensures that your business is ready for whatever comes tomorrow while improving your bottom line today.