…And E-commerce payment professional should be conscious about it. Payment is a cycle not a funnel.

In a recent post on Linked’in, I shared with audience that Payment cycle does not work like an E-com Funnel.

I thought it was interesting in this post to keep on the conversation on the difference between the e-commerce funnel, and the payment lifecycle.  

Deciphering the E-commerce Funnel

E-commerce funnel idea is based on a simple assumption. You need to perform a serie of marketing actions to convert a visitor to a lead and then to a real customer. Let’s see together the different phases of this funnel :

• Exploration phase: Visitors are here to compare, browse the website, get aware of what is offered.
  
• Consideration phase: Visitors found something interesting on the website. It matches all the criterias they have in mind. It is now prospects. We aim at keeping them on the website. Otherwise they will rebound on another website. Everything is good to keep them, until they decide to put something in the shopping cart.
  
• Intent phase: Prospects added items in the cart. We need now them to add potential new items. But, ultimately they will have to open an account or log in.
  
• Checkout phase: Prospects is now a customer. They have opened their account, the items are in the cart. Website can still offer the possibility to add more. Customers now enter the last crucial part of the funnel: Invoicing, delivery, payment. They need to indicate their delivery address, invoicing address, a delivery option if applicable. Payment option is the ultimate step, before closing.

E-commerce managers observe, analyse all the change from one step to another. They use the famous conversion rates. Those ones are key to judge the sanity of funnel.

Refund and Frauds central to evaluate the Cost Per Transaction

E-commerce managers will potentially look at the fraud rate and the refund rate.

But not because it is bad for the payment indicators, but because it is bad for the funnel.

• Too much frauds indicate that funnel is used for something else than legitimate buying, and it costs at the end.
  
• Too much refund also indicate that funnel is used for something else than legitimate buying

Both fraud and refund rates represents:

• Visible indicators of customer quality. Nobody wants to attract customers that frauds or gets refund.
• Additional cost to watch after the costs of acquisition spent to drive customers to the website

Cost per transactions represents therefore the cost to acquire the customers but the cost to retain them as well.

But Payment is not funnel. That’s the problem.

Payment cycle is an E-com funnel, it is not a strict OK or KO decision, with a transformation rate.

Acceptance rate is part of a full cycle, and should not be seen as a final step, but a whole new cycle to start monitoring. We talk about a cycle because it is not linear with a succession of step to tick to arrive at the validation.

Acceptance rate is correlated with decisions that happen pre and post payment :

• Chargebacks
• Refunds
• Authentication
• Clearing issues between acquirers and issuers
• Payment option integration

So attention should be on the entirety of cycle of payment, and not only on your payment page.

For example, a high number of chargebacks impact decision from issuers to accept or not a transaction. Website represents a higher risk for them, and they will try their best to streamline risks, especially chargeback risk.

Payment is the most crucial part of checkout. If customer is blocked by payment, they will walk away and potentially not coming back again. So all cost involved to acquire customers will be useless.