Important Payment KPIs for you to monitor in e-commerce

Companies should not just calculate, but should also regularly monitor, various indicators, in order to track their performance in the e-commerce sector. Payment and Risk KPIs both play an important part in this. While Payment KPIs represent a company’s economic viability among other things, Risk KPIs are mainly used for assessing and evaluating the risks which the company currently faces.

We look at both types and tell you which Payment and Risk KPIs you should always keep an eye on.

An overview of the most important Payment and Risk KPIs

We have broken the various indicators down for you and evaluated their significance for your company, to help put them into perspective.

Authentication Rate

The term Authentication Rate refers to the transaction attempts that have been successfully completed without being blocked by your company’s bank or risk solution. If the Authentication Rate is high, it means that the majority of transaction attempts have been allowed.

This indicator has little significance by itself, as it does not tell you how many authenticated transactions actually generated revenue. For example, returns and Manual Review Rejects also count as authenticated transactions.

CB Rate = Chargeback Rate

The Chargeback Rate is an important factor for your e-commerce business. This is because a chargeback means that a purchase which has previously been authenticated has been reclaimed by the payment issuer due to a detected fraud.

It means, in the worst case, that you have lost both the money you collected and the goods you have already sent.

A high Chargeback Rate also means that your business’s reputation with payment service providers will be tarnished, and that your customers will be checked far more thoroughly and rejected far more frequently in future. In the worst case, your payment service provider will cease to support your company.

HR CB = High Risk Chargeback

The Chargeback Rate distinguishes between High Risk and Low Risk Chargebacks. High Risk Chargebacks represent chargebacks in respect of transactions which had previously undergone a manual review and been accepted, but the order nevertheless resulted in a chargeback.

This will enable you to monitor and control the performance of your manual review agents.

If an agent makes bad decisions, this will be reflected in a high High Risk Chargeback Rate.

LR CB = Low Risk Chargeback

Low Risk Chargebacks are chargebacks that have not previously undergone a manual review because they were accepted by your risk solution.

In contrast to the HR CBs, you can use the LR CBs to check how your risk settings are performing. You should definitely adjust your risk calibrations if the Low Risk Chargeback Rate is very high.

MR Rate = Manual Review Rate

An online shop’s risk solution and the algorithms it relies on will not take care of absolutely all of the shop’s payment processes. A good risk management solutionalways includes the option to manually check various payment processes and to manually activate various orders.

The Manual Review Rate calculates the proportion of manual reviews in relation to the total number of authenticated transactions. However, the rate should only be high enough to maintain an appropriate cost/benefit ratio, while still ensuring that regular reviews take place which reliably prevent cases of fraud.

On high volume days, e.g. Black Friday, there will be so many orders that the manual review process will not have enough capacity to handle them. In this case, the risk solution must be calibrated so that only the volume of orders that the review process can cope with is directed to it.

The calibration often requires special fine-tuning to achieve the optimal rate.

MRA = Manual Review Accept

The Manual Review Rate is in turn divided into two different categories. The first category records the MRA factor, namely the transactions that the agents have accepted in the manual review process.

If there is a high number of MRAs, it means that the risk solution’s settings are not effective because a lot of good orders are being directed to the manual review process. If MRAs and High Risk Chargebacks are both present in large numbers, it means that theagents are not assessing the risk correctly.

MRR = Manual Review Reject

The second category records the transactions rejected in the manual review process. The MRR is much more difficult to assess, because false positives (i.e. good customers incorrectly classified as fraudsters) do not arise. This makes it difficult to decide whether the agents have correctly assessed the risk and actually avoided any cases of fraud.

This is where a quality assurance session with anlyx, in which our experts will check for false positives, can help. This will give you an insight into the quality of the agents’ decision-making.

G = Genuine

Genuine refers to all authenticated transactions in the payment process which do not lead to a chargeback and are instead carried out as normal and therefore profitable, transactions.

Genuine payments are one of the most important factors among the Payment KPIs, as they indicate what percentage of your company’s customers are honest.

The higher this percentage, the more effective your risk management solution is.

Conclusion: Experts provide comprehensive and targeted advice

The success of your business depends on keeping track of the various Payment and Risk KPIs. The various Payment and Risk KPIs, and especially the Payment KPIs, will play an important role in optimising your company’s risk solution and therefore in your company’s success on the open market.

It is often difficult for e-commerce companies to take care of both Payment and Risk KPIs and to calibrate their individual risk solutions optimally. It is therefore advisable for them to call on experts who are able to provide targeted support.