Last year, we published a series of blog posts on the topic of payments optimization, breaking down what we consider to be the five key objectives of optimized payments:

1. Realizing your greatest revenue potential

2. Keeping the cost of payment acceptance low

3. Decreasing your fraud risk

4. Understanding and better serving your customer base

5. A/B testing new solutions

We then proceeded to spend 2024 updating and improving the Pagos suite of products to make it easier than ever for our customers to tackle payments optimization. As a result, we have a beautiful new Service Panel and updated tooling, designed by payments experts for payments professionals of all experience levels. If you’re ready to take payments optimization into your own hands in 2025, this is the place to start.

Why Bother With Payments Optimization?

The practice of processing payments involves way more than just accepting transactions. It encompasses an entire set of business operations, including (but not limited to): 

• Accepting a variety of card types, payment methods, and currencies

• Designing an intuitive checkout

• Managing relationships with payment processors, fraud tool providers, card networks, and more

• Handling subscriptions, recurring payments, and stored payment methods

• Dealing with returns, refunds, and chargebacks

• Assessing and fighting fraud

Given all these complexities, it should come as no surprise that there are always opportunities to make improvements and operate more efficiently. Assessing each aspect of your payments operations, analyzing your incoming payments data, and setting clear goals for improvement will take your business from basic payment processing to true payments optimization. If you’re looking to improve your bottom line (and who isn’t?), it’s time for you to reframe payments as a strategic lever for driving business growth and improving performance.

If you’re ready to get started, let’s explore just a couple of the ways Pagos can help you with each of the key payments optimization objectives

Realizing Your Greatest Revenue Potential

To maximize your revenue potential, it is crucial to make informed business decisions. With good data and direct oversight of your payments operations, you can always find new opportunities for growth. Here’s how Pagos can help:

Using data to identify missed sales opportunities

Peacock, our data visualization platform, gives you immediate insight into your entire payments operations. Using no-code data connections, we’ll ingest data from each of your payment processors and aggregate it into one harmonized data feed that powers a set of powerful data visualizations. 

By analyzing your historical payments data in Peacock, you can spot the regions or countries where customers are—and where they spend the most on average—and adjust your operations to cater to them. The same is true for identifying which of your payment methods and currencies customers prefer. Here’s an example of one Peacock visualization, in which you can see your approval rate data broken down by processor, payment method, card type, and more. With just a few clicks, you can identify the types of transactions and segments of your custom base contributing the most to your approved volume. 

Using Peacock, you can also dig deep into your declined transaction data. Viewing your declines broken down by decline code can help you identify the biggest issues cutting into your revenue and adjust your operations accordingly to prevent future losses. Your decline data can also reveal missed opportunities in terms of legitimate customers who abandoned their carts after an addressable decline failure. Any decline you can recover is a potential lifelong customer you’ve satisfied.

Minimizing Involuntary Churn With Account Updater

If you offer subscriptions, have a recurring billing strategy, or store customer cards on file (or all three!), you need to ensure saved card credentials are both secure and up-to-date. Loon by Pagos can help you there, as it offers account updater services from all four major card brands! Whenever a customer’s stored card is lost, stolen, or replaced, Loon updates your vault with the new credentials—all without burdening the customer in any way. If a customer’s payment method expires and they forget to manually update it in your system, they will never involuntarily stop their subscription to your services; instead, Loon will update their payment details without interruption, preserving the customer relationship and your revenue. Unlike other account updater solutions, Loon is processor agnostic and you have complete control over which cards are sent to Loon for updates.

Keeping Costs Low

One of the central tenets of payments optimization is cost reduction. The costs of processing payments can really add up—especially when you aren't tracking where fees come from and what's driving them. As such, finding ways to cut costs requires work and a deliberate strategy. Here are just a few examples of what cost cutting measures might look like for your business and how Pagos can help.

Sending Enhanced Data to Optimize Interchange Costs

Enhanced data, also known as Level 2 and Level 3 data, is additional information like sales tax amount, order number, and/or product description that can be passed with a transaction. If a customer’s payment card qualifies for Level 2 or Level 3 processing and you pass along this enhanced data with their transactions, the undeniable benefit is lower interchange rates in the US. In other words, when you pass more information with some transactions, you can cut down on your fees! 

The Enhanced Data visualization within Peacock demonstrates exactly how much of your approved transaction volume you could have realized cost savings for had you passed enhanced data.

Understanding Penalty Fees

No matter how efficient and organized your payment processing setup is, you’re going to face penalty fees from card brands and processors alike. Excessive retries, authorization issues, incorrect data or timing of data, and fraud monitoring concerns are only a few examples of fees resulting from addressable operational behaviors. The first step to cutting these costs is understanding exactly what you’re being charged and why. That’s why we built the Penalties dashboard directly into Peacock. Here, you can view the individual penalties you’ve faced, along with the total amount of fees your processor has charged for each, and practical guidance on how to avoid them moving forward. Keep in mind, this is a data visualization you’ll want to monitor regularly, as the penalty fees you face will change over time with any updates to your code, processor or vendor operations, or card network rules and regulations.

Decreasing Fraud Risk

Fraud can incur significant costs for your business, both in the workload it puts on your employees and the actual financial cost of fraudulent declines, chargebacks, and returns. With the right tools and payments data, you can identify trends in your transaction volume and identify opportunities for mitigating fraud risk.

Analyzing Fraud Data to Establish Trends

Payment processors that also have fraud tools—like Adyen, Stripe, and Braintree/PayPal—assign fraud scores to transactions based on rules like mismatched billing addresses or high-risk locations. These scores help businesses like yours decide whether to approve, decline, or review certain transactions. The Fraud Dashboard within Peacock offers insights into your own scores, helping you spot trends and anomalies in the fraud scores assigned across your transaction volume and your fraud rule performance over time. By understanding which rules trigger and their impact on outcomes like disputes or blocked payments, you can optimize fraud prevention strategies and avoid rejecting legitimate customers.

Detecting and addressing fraud attacks in real time

Canary, our payments data observability tool, automatically monitors the segments of your business with the highest historical transaction counts and alerts you when your approval rate and attempted transaction count change significantly from the historical norm. Should you experience a fraud attack that causes a sudden spike in fraudulent transaction attempts and severely decreases your approval rate, you’ll want to know and respond immediately so you can minimize the damage. With Canary Alerts, you’ll never miss an attack again and can quickly dig into what segment of your business was impacted. 

Here’s a quick look into how you can visualize such alerts with Pagos:

Understanding and Serving Your Customers

If payments are the lifeblood of a commerce business, customers are the true life source. Fundamental to your business success is your ability to market to, attract, and deliver excellent experiences to your customers—including keeping their personal account information secure. 

Learning About Your Customers

Your payment processing data contains a multitude of information about who your customers are and what they want. Analyzing your payments data—attempted, approved, and declined transactions, chargebacks, and refunds—can teach you which customer segments to market towards and which to avoid. The Metrics section of Peacock can help you with all of the following (and more!):

• Determine which payment method to promote in advertisements or at checkout because it’s associated with customers who purchase larger orders

• If your business model caters to both one-time and subscription purchases, use stored credential data to identify which may be more popular with certain customer segments and identify opportunities for expansion

• Recognize which card brands, card types, or card issuing countries you may want to design fraud rules around, because they’re associated with high decline and chargeback volume

Protecting Customers with Network Tokens

Customer loyalty often hinges on your ability to keep stored payment methods safe and secure. Toucan by Pagos has you covered with global network tokenization services for all four major card brands. Network tokenization is the process through which card brands substitute a cardholder’s primary account number (PAN) and other card details with a restricted-use, unique ID known as a network token. Storing network tokens instead of PANs greatly improves customer security, as fraudulent parties can’t use stolen network tokens to make purchases or even pull critical customer information from them. In addition to customer protection, Toucan provides you with cost-saving processor-agnostic network tokens, meaning you can generate a single network token for each customer’s primary account number (PAN) and use it to process transactions through any processor you use globally. 

Because of this added customer security, transactions processed with network tokens face significantly lower interchange rates than PAN transactions. We can even help you identify exactly how much potential savings exist with our Network Tokenization Opportunities visualization in Peacock! Here, you’ll find the total value of your approved, merchant-initiated card transactions broken down by whether they were processed with a PAN or a network token. Multiply the PAN amount by the lower interchange rate—conservatively estimated to be about 0.10% in the US—to identify the lower fee amount you could have paid if you’d used a token instead.

A/B Testing New Solutions

Embracing innovation is essential for staying competitive. To optimize your payment processing, you need the ability to test new processors, payment methods, markets, and checkout experiences and measure their performance side-by-side. This empowers you to make data-driven decisions and continually improve your payment processes over time. With the payments data visibility offered by our Peacock and Canary products, you’ll have complete oversight into the immediate and lasting impact of any experiment.

Identifying Testing Opportunities with Benchmark Data

If A/B testing can help you evolve your business and stay competitive, how do you actually identify where your business might not be matching up with industry peers when it comes to payment processing capability and functionality? Flamingo, our payments data benchmarking service, allows you to anonymously compare your payments data to that of your industry peers—making it possible for you to know in the moment when your business isn’t keeping up with the market or if something has changed for you but not your peers/the rest of the market. Flamingo integrates seamlessly into Peacock, meaning you can even observe in real time how an experiment moves you closer to (or further away from) the industry standard.

Experimenting to Optimize Chargeback Responses

Optimizing your response to chargebacks is critical in reducing the financial impact of fraudulent transactions. By A/B testing more efficient dispute resolution processes, you can increase your chances of winning chargeback disputes and recovering lost revenue. Using the Chargeback Win Rate graph in Peacock’s Chargebacks dashboard, you can identify which types of chargebacks to A/B test new chargeback-handling procedures on. This graph presents your overall win rate (the percentage of chargebacks you fight that you ultimately win) broken down across different chargeback reason codes: 

If a certain type of chargeback has a lower win rate, it could be due to insufficient documentation, gaps in how you present your case, or a lack of compelling evidence for refuting fraudulent claims. Use what you learn in this chart to revisit your approach, including the evidence and arguments you submit in your defense. Keep in mind, this is another metric worth monitoring closely over time, as win rates will fluctuate in response to any changes you make to your business or chargeback response strategy.

Optimizing Payments With Pagos

Payments optimization is not a one-size-fits-all solution—it involves a strategic approach tailored to your unique business needs. But while the approach may differ, we believe every commerce business can realize their highest payments potential with a strategy centered around these five optimization cornerstones: cutting costs, increasing revenue, delighting customers, reducing fraud, and market testing new solutions. 

Contact us today to see how Pagos can help your business optimize payments!