COVID seems to have changed everything about our everyday lives, including making a huge impact on card payments. We’d like to provide some insights into what we have seen in our data over the past 6 months of COVID:
This one is easy. Most of us have experienced this in our daily lives. Instead of going to your favorite restaurant, you placed an order online. Or had groceries delivered. Or perhaps you started picking up your fast-food curbside via your favorite brand’s app. There has been a monumental shift into e-commerce sales. And with this increase in e-commerce volume, that means increased cost. Many credit card payments are about 30 bps more expensive being processed as e-commerce versus card-present. Also, e-commerce requires more compliance around data that must be submitted with the authorization, like AVS (address verification service), so there is a greater chance of downgrades or greater risk of fraud.
Below is an example of a merchant that saw a large increase in e-commerce sales, and how their effective rate was affected:
Debit Card Growth
You would think that as the economy drops, there would be less use of debit cards. When we had the crash back in 2008, everyone switched to using credit cards because they didn’t have any money on hand. In 2020, we have seen an opposite effect. Most merchants are seeing an increase in debit card usage, which we believe is linked to the stimulus payments. As you may know, debit cards are about 200 bps cheaper than credit cards. Monitoring your credit vs debit card mix and costs is key to understanding and forecasting your costs every month.
Below is an example of a merchant that saw a large increase in debit card sales, and how their effective rate was affected:
Refunds and Chargebacks
Merchants in the travel industry have been most severely impacted by COVID. Instead of selling flights, rooms, or event space; they were issuing refunds and fighting chargebacks. At one point during the height of the pandemic, some hotel properties were refunding more sales than they were bringing in. Not only did this have cost impacts, but it created bank deposit issues and reconciliation nightmares. This is why we stress the importance of having great reporting on daily deposit activity and keeping a close eye on chargebacks. As revenue dipped during COVID, the outcome of fighting chargebacks was even more important.
Below is an example of a merchant that saw a large increase in refunds and how their refund rate (refunds/sales) was affected:
To hear more about the impacts of COVID and insights you can gain from managing your payments via analytics, catch Anand presenting with Greg Moore from AutoNation at the virtual AFP Conference next week.