7 Payment Processing Challenges Businesses Face and How to Overcome Them

Smooth payment processing is the backbone of any online business. Whether you’re an e-commerce platform, subscription-based service, or donation platform, you must offer your customers a smooth payment transaction experience.

Smooth transaction processing creates a positive customer experience, while studies have shown that a negative payment experience can lead to cart abandonment, lost sales, and even a damaged brand reputation.

Although brands want to offer customers a smooth payment processing experience, things are not always in their control. For example, payment processing challenges and in this article we look into the most common ones.

Common Payment Processing Challenges

While different businesses may face different digital payment challenges, here are some common issues that businesses face:

1. Payment Gateway Integration Issues

A payment gateway is a tech platform that enables online businesses to accept, process, and manage various online payment modes, such as credit cards, debit cards, digital wallets, etc., in a secure environment. It is an intermediary between the customer, the business, and their respective financial institutions.

Businesses must integrate a payment gateway with their existing system to work through it. However, integration challenges may arise if you have a poor API, multiple payment providers, or a legacy infrastructure. Lack of seamless payment gateway integration can lead to slow transaction processing and a poor customer experience.

But you can fix this.

• Choose a reliable third-party platform that can handle end-to-end payments for multiple payment modes and offers easy integrations.
• Partner with a provider that has developer-friendly APIs. For example, with PayBy, you can easily integrate it with your website through APIs to enable cashless payments with multiple payment modes.
• Test and validate the integrations are working fine.
• Ensure the payment pages are mobile-optimized so customers can have a smooth transaction experience.

2. Security Concerns and Fraud Prevention

As digital payments accelerate worldwide, the UAE's scene is not so different. A report mentions that card payments in the UAE registered a growth of 14.6% in 2023 to reach AED451.4 billion ($123.0 billion).

At the same time, payment frauds are on the rise. A news report mentions that 54% of customers in the UAE have been a victim of fraud at least once. Customers and businesses are falling prey to fraudulent transactions. Data breaches and unauthorized access are leading to financial losses and reputation damage.

Building a robust security system can help you build trust. A survey report mentions that 47% of respondents are likely to return if they’re assured that payment security is correctly handled.

This is what you can do.

• Conduct regular security audits to ensure all security systems are in place.
• Invest in a robust payment security system.
• Consider using AI for fraud detection to identify abnormal user behavior while making payments.
• Investing in payment gateway security, payment tokenization, two-factor authentication, and a robust verification process can prevent fraudulent transactions.
• Choose a platform like PayBy to ensure all your transactions are safe. The platform offers end-to-end communication encryption using TLS and SSL Protocols, security password control solutions of CFCA, AI-based fraud monitoring, and 3D secure authentication.
• It has been given the highest levels of financial service approvals to conduct Stored Value Facility (SVF) and Retail Payment Services (RPS) operations.

3. Compliance with Payment Regulations

Maintaining compliance and payment regulations is crucial for businesses to avoid data breaches and keep customer information safe. Non-compliance can lead to hefty fines, penalties, and reputation damage for the business.

One important regulatory compliance that businesses must fulfill is the Payment Card Industry Data Security Standard (PCI DSS). The Payment Card Industry Security Standards Council governs this set of security standards, which aim to secure credit and debit card transactions against data theft and fraud.

Similarly, the General Data Protection Regulation (GDPR) is another set of compliance regulations an organization must meet when handling personal data. This regulation gives customers more control over how businesses collect and process their data.

Businesses worldwide must ensure that PCI DSS and GDPR compliance are always met to prevent data breaches and unauthorized access.

• To ensure you’re adhering to compliance guidelines, conduct regular audits.
• Partner with payment platforms like PayBy to ensure that your business always stays compliant.
• PayBy ensures you’re PCI DSS compliant, conducts regular third-party audits, and has a security team to monitor your data's safety.

4. High Transaction Fees

High transaction fees always impact revenue. So, for brands, it is important to create a revenue system with minimum overheads and additional costs. While some expenses are unavoidable, some fees can be minimized, for example, by carefully choosing the pricing models of payment providers.

Some PSPs charge monthly usage and termination fees. Additionally, processing credit cards can incur higher transaction fees depending on the volume of transactions processed.

However, brands can minimize transaction fees.

• Choose payment providers based on percentage-based and flat fees to help you save costs.
• You can also consider negotiating with payment processors and optimizing transaction volume to reduce costs further.
• Always stay up-to-date with financial and legal requirements to avoid any unnecessary costs from new regulations that you’re unaware of.

5. Payment Disputes and Chargebacks

Payment disputes and chargebacks are becoming increasingly common practice. Chargebacks happen when customers contact their credit card issuing bank to dispute a charge. Customer dissatisfaction and fraud claims are some of the most common causes of payment disputes. In a chargeback case, the customer claims they have not received the product or don't even remember making the payment. They then request a refund from their bank or credit card company.

Chargebacks are a costly affair for any company. It affects the company’s cash flow and increases the administrative overheads.

However, you can prevent disputes and manage chargebacks effectively.

• Have a clear communication strategy with your customers about your refund and dispute resolution policy.
• Maintain transaction records and supporting documents to defend against unjustified chargebacks.
• Partner with platforms like PayBy that offer chargeback management services and shield your business against chargebacks.

6. Cross-border Payment Complexities

One of the biggest benefits of online shopping is that customers can buy products from global brands. While digital transactions can easily navigate the different payment methods within one country, the process becomes complex in cross-border payments.

Challenges arise regarding multi-currency conversion, diverse payment methods, and international regulations. Moreover, exchange rates constantly fluctuate, and high foreign transaction fees can impact total revenue. The speed of processing cross-border payments also impacts the business.

But you can solve these challenges and offer a smoother cross-border transaction experience.

• Look for a payment processor that has experience with cross-border payments.
• Partner with a payment processor that offers multi-currency support and real-time currency conversions.
• Consider the local payment preferences and integrate them into your system for a better user experience.
• Familiarize yourself with different local regulations and compliance requirements.
• Educate international customers about the payment and delivery procedures to avoid complications later.

7. Customer Experience and Checkout Abandonment

Like it or not, a poorly designed payment processing system can frustrate your customers and negatively impact the user experience despite having good products/services. As data shows, 88% of online consumers are less likely to return to a site after a bad user experience.

As a survey suggests, 43% of customers in the UAE mentioned that an easy checkout experience is one of the reasons for online shopping. However, customers can abandon the cart if the checkout process is difficult.

Most customers abandon the cart during the checkout process if they don't see their preferred payment options, they’re unsure if the payment gateway is secured, if the payment page takes too long to load, if it is a non-responsive payment site, and if the payment site is not optimized for mobile users.

To reduce abandonment rates, focus on improving the checkout processes.

• Build a simplified checkout process where you can minimize the number of steps by offering a guest checkout.
• Offer one-click payments.
• Optimize the payment page for mobile users with a responsive design.
• Look for a payment gateway that offers multiple payment modes like QR code payment, mobile wallets, credit and debit cards, etc. Solutions like PayBy can enable cashless transactions and online payments via various international and domestic credit cards, debit cards, and over 1.5 billion wallets.
• Enhance payment security by staying compliant with the PCI DSS regulations.

Overcome Payment Processing Challenges

Payment processing challenges can impact your cash flow revenue, lead to lost sales, and damage your brand reputation. While managing all these payment processing challenges is important, it’s difficult to tackle them separately. Investing in a solution like PayBy can be a game-changer as it helps you to navigate all the payment processing challenges effectively from one single platform.

Its secure and omni-channel digital payment solutions can help increase your revenue. PayBy offers multiple payment modes across all touchpoints, improves customer transactional experience, reduces cart abandonment, and offers better payment control.

‍Get started with PayBy today.