3 ways to leverage payment processing data to reduce costs and risk

How often do you spend time reviewing your payment processing data? If the answer is rarely or never, you could be missing critical cost-saving opportunities. Insights from merchant data analytics can help you reduce merchant services rates and fraud risk to improve business metrics.

Payment processing analytics may seem complex, but some merchant services providers offer intuitive reporting dashboards that make it easier to uncover valuable insights.

Regularly accessing your merchant transaction reporting can help you understand how card interchange fees work. It also provides insight into why chargebacks occur and how to prevent them, and can alert you to fraud trends to help prevent losses. Ultimately, your payment data is key to helping you cut costs and better serve customers.

Take action with the following data strategies that help you drive more profitable business outcomes.

1. Reduce interchange rates with payment data reviews

 Major card networks like Mastercard and Visa charge different interchange rates depending on the type of card. Your payment processing data is key to understanding why some transactions carry higher fees. From there, you can make adjustments that boost your bottom line. 

Look for the following:

• Make sure transactions have cleared correctly. Consumer cards typically clear at lower rates than business credit cards, though that isn’t always the case.

• Examine transaction amounts. Make sure your merchant services account is set up so you’re charged the lower fees associated with higher-value purchases. If you have a high volume of lower-value transactions (e.g., $15 or less), talk with your provider to negotiate lower fees.

• Review your pricing structure. Compare the impact of flat-rate pricing versus interchange-plus pricing, to see which is a better fit for your business. Flat-rate pricing charges a uniform rate regardless of transaction size or type. Interchange-plus pricing includes a specified markup above the interchange rate. 

At SVB, our experts understand the diverse business models of innovation economy companies. We help clients identify the most cost-effective payment processing plan at each stage of growth.

2. Prevent chargebacks with proactive transaction monitoring

Did you know that on average, each chargeback could cost your business over $190? According to industry analysts, that’s what you can expect when you add up transaction amounts, fees, and operational costs to resolve disputes. It’s no surprise that nearly 50% of businesses that accept payments are prioritizing chargeback prevention as a core risk management strategy.

Disputed transactions can eat into revenues and derail your staff from more strategic work. Worse yet, if your chargeback rate exceeds 1%, you could incur additional fees and fines. 

To reduce chargebacks, it helps to know why customers request refunds through their card issuers. You also want to be aware that disputes initiated by customers are often ‘friendly fraud’. Sometimes requesting refunds through a card issuer is a way to avoid dealing directly with merchants and their return policies. 

Avoid disputes by resolving common issues

Of course, customers may have legitimate disputes and you want to minimize those as well. Here are a few pitfalls to avoid:

• Check your billing descriptor or business name that shows up on customers’ credit cards statements. Is it easily recognizable, or might it confuse customers? An unrecognized name on a card statement could trigger customers to report an unauthorized charge.
• Could there be problems with fulfillment? (e.g., do customers receive incorrect orders?) 
• Does your company make it easy to return mistaken orders or defective products? And is your return and refund policy clearly stated before people complete a purchase?

On your merchant services account, sign up for any notifications that alert you to chargebacks and act quickly. Delve into each one, and if you want to dispute any, start the process immediately — you only have a limited amount of time to do so. For legitimate requests, issue a refund. This helps you maintain your merchant account standing and ensure a better customer experience to drive repeat business.

3. Detect fraud patterns with payment data analytics

Fraudsters are relentless in e-commerce, and online payment fraud losses are expected to exceed $360 billion by 2028. Regular payment data reviews are crucial for risk management. Your merchant data analytics can help you identify transaction patterns common to fraud so you learn how to detect and prevent risk.

For example, large purchases or requests for rush shipping could signal a need to examine orders carefully before approval. Some companies will only ship to the cardholder’s billing address in an effort to thwart fraudsters or choose that option if there are signs the transaction is risky.

The threat of fraud is another reason to revisit your original merchant services account setup. Consider these questions:

• Are there empty data fields you should be using?
• Are you set up for the Address Verification System (AVS) and the Card Verification Value (CVV) security code?
• Are you reviewing your batch transactions to identify when a customer repeatedly tries to use the same card number? This can indicate fraud.

Along with taking these steps, you must also protect your customers’ payment data by complying with PCI security standards. Robust preventive measures can help to shield your business from financial and reputational losses resulting from non-compliance.

The more insight you have … the more quickly you can react and resolve issues.

Tracking your payment processing data daily, or at least weekly, is critical to help protect and grow your business. To make it easier, set up recurring reports that you receive by email and can import directly into your accounting or ERP system. The more insight you have into the costs associated with accepting card payments, the more quickly you can optimize processing rates and help reduce costs and risk.

SVB Merchant Services are built for the unique needs and growth stages of innovation economy companies. Contact us to learn how we can help you optimize payment processing to drive growth.

Frequently Asked Questions

What is payment processing data?

Merchant payment processing data is the information captured during credit, debit and stored-value card transactions. Data includes card types, transaction amounts, time stamps, authorization codes, decline reasons, and settlement details. Within your merchant services platform, payment data analytics provide metrics on processing fees, average ticket size, approval rates and chargeback ratios. It can also give you actionable insights about customer behavior, fraud patterns, and opportunities to optimize rate plans to reduce costs.

How can reviewing merchant payment data reduce costs?

Regular payment data reviews can uncover cost-saving opportunities. A few merchant data strategies include:

• Analyze transaction trends like most-used card types to help you negotiate better processing rates.
• Look for payment patterns like peak transaction times to optimize batch processing schedules for lower fees. 
• Monitor decline rates and retry patterns to reduce unnecessary authorization fees.
• Identify high-risk transactions and potential fraud to prevent costly chargebacks and losses.

What’s the difference between interchange plus and flat-rate pricing?

Interchange plus pricing separates card network interchange fees from your payment processor's fees, providing transparency about your total costs. Flat-rate pricing uses a single percentage rate regardless of card type. Payment data analytics can reveal transaction patterns to help you determine which model is more cost-effective for your business.

What fraud patterns should I look for in payment data?

Payment data can reveal red flags that signal potential fraud, such as: 

• Multiple failed attempts followed by approval (known as card testing)
• Multiple orders using sequential card numbers
• Unusually large orders from new customers 
• Rush shipping requested on high-value items
• Mismatched billing/shipping addresses

With advanced security in your merchant services platform, you should flag patterns like repeated use of different cards from the same IP address, transactions just below your verification threshold, and unusual purchasing times or volumes. If you process international orders, those transactions may also warrant closer scrutiny.