This piece was first published on March 31, 2020.
Editor's note: Oliver Wyman is monitoring the COVID-19 events in real time, and we have compiled resources to help our clients and the industries they serve. Please continue to monitor the Responding To Coronavirus Hub for updates.
As your payments business deals with the rapidly changing COVID-19 situation, you will inevitably feel pressure on your cash flow and profitability. While your organization is likely undertaking enterprise-wide planning already, we have developed a ‘quick list’ of merchant tips on near-term actions merchants can take to impact Payments-related costs as well as revenues.
And Ways To Adapt And Mitigate Impacts
Proactively engage with card networks
Proactively engage with card networks and ask that they play their part in supporting you and the broader merchant community in these difficult times. Raise the topics of network assessment forgiveness (including dispute resolution expenses), interchange relief, and a further delay to the interchange increases occurring in July (originally scheduled for April) and October. Also, be sure to emphasize that you expect the networks to play an active role in ensuring that the chargeback system is not improperly used by consumers and issuers.
Collaborate with your processors / acquirers
Similarly, collaborate with your processors / acquirers and ask that they also play their part in supporting you. If applicable, ask for flexibility in reserve / retention requirements and for additional support in managing customer expectations and refund requests. Emphasize that you need and expect them to be playing an active role in engaging the card networks on behalf of you and your community of merchants.
Examine your card interchange data in detail
Examine your card interchange data in detail to be sure that every dollar is qualifying for the best interchange rates today. Transactions that do not qualify for the best rates (for example, under Visa, transactions that do not qualify for "CPS", or other “downgrades”) represent an immediate opportunity to lower cost of acceptance if there are quick-fix opportunities such as ensuring ZIP code information flows for e-commerce transactions in the US.
Enabling PIN-less debit
Take other actions to lower the cost of acceptance such as enabling PIN-less debit for eCommerce and physical POS and deploying 3D Secure to shift chargeback liability, and also qualify for lower interchange rates.
Encouraging customers to reschedule their purchases
Where possible, consider encouraging customers to reschedule their purchases rather than cancel, and offer incentives to do so, if needed.
Look at auth rate as a function of dollars and not number of transactions
Measure and control your authorization rates. Make sure you look at auth rate as a function of dollars and not number of transactions. It’s far more important that a high dollar transaction is authorized than a zero dollar auth. As volume shifts to card not present channels, you may need to pass address verification and CVV to keep authorization rates above 90 percent. You may also need to contact certain banks directly that have unusually low authorization rates and ask for policy changes.
Offer a credit for future purchases
For cancellation refunds, instead of refunding to the original form of payment (and therefore returning cash), offer a credit for future purchases, potentially with bonus incentives (such as five percent bonus funds).
Drivers of your declines
Segment and evaluate the drivers of your declines to seek out opportunities for improvement (optimizing fraud rules, looking at issuer-specific declines due to data limitations) and drive incremental spend.
Reduce friction in the shopping journey
Consider opportunities to actively reduce friction in the shopping journey (as seamless guest checkout, one-click purchase) to reduce abandonment and increase conversion.