The cycle of business involves generating demand, making a sale, and getting paid. This constant pattern is what generates revenue and keeps businesses afloat.
But what’s lost in this oversimplification is taking the time to understand what’s happening at every stage and how it’s impacting performance. Every completed or failed transaction is an opportunity to look back, learn, and improve.
This is where payment analytics come in. The payment analytics process helps businesses understand the details of how customers are interacting with businesses and the insights can help save money, maximize sales revenue, and protect your business from fraudulent activity.
Here’s what you need to know to get started.
Defining payment analytics
Payment analytics is the process of collecting, compiling, and presenting payment data to glean actionable insights about your business. Needless to say, that covers a lot of ground, and the payment insights can change depending on the context.
What payments analytics entails varies based on the type of business, size of operations, and payment methods offered—an ecommerce brand will work with different data than a brick and mortar retail shop or service provider.
But generally speaking, payment analytics will involve the same processes of combining data across platforms into a centralized report of the entire payments environment for analysis.
Why do payment analytics matter?
So much of what a business does is towards generating sales. But once a sale is rendered, there’s a wealth of learning potential to guide future efforts.
Within payments data is crucial information about how customers interact with your business. And if you start to divide that payment data up by customer type (e.g., corporate sales versus consumer sales), you get a clear picture of what drives sales and converts people into clients.
Every team that thinks about revenue generation should care about the results. Even the small details about payment types, items purchased, or platform used informs strategies to optimize the sales funnel for better results.
What information is included in payment analytics?
Payment analytics will typically contain the following information:
- Payment method (such as credit card, debit card, or digital payment platform)
- Transaction amounts
- Processing fees
- Transaction volume
- Discounts applied
- Refunds and chargebacks
- Failed or fraudulent transactions
- Time to complete transaction
In addition to this information, businesses may also look into the products or services purchased, the sales channel they went through, or glean demographics from customer data to further understand what’s generating sales, what’s being purchased, and who’s doing the purchasing.
What kinds of questions can payment analytics answer?
Payment analytics can be one of the richest sources of information for your company. Here are just a few of the kinds of questions payment analytics can answer.
For incoming payments from goods
When you're analyzing payments received from the sale of goods, payment analytics may start with questions such as:
- Are certain products more popular at specific times of the year?
- Which products are most often bought with which other products?
- Are there any key purchases that drive future conversion rates?
The best answers will be prescriptive, meaning they help you decide what to do, such as choosing products for a seasonal newsletter, offering upsells, or separating customers into unique segments for different email campaigns.
For incoming payments from services
For business-to-business (B2B) payments or business-to-consumer (B2C) services, payment analytics can answer questions like:
- Which clients pay within 15 days, 30 days, 60 days, or more? (And will payment reminders shorten the time?)
- Which services lead clients to add other services?
- Is the first service a client buys related to the length of time they remain a client?
Again, the best answers will help you make informed decisions to grow your company. If you're predicting a cash shortfall, you'll know which projects to accelerate to get paid quickly. You'll also know which services bring your best clients in the door, and therefore where to focus your marketing efforts.
For outgoing payments to vendors
When it comes to the payments your business makes to vendors, payment analytics can measure and track your internal efficiency and creditworthiness. You might use it to answer questions like:
- What's the average amount of time my vendors and providers wait before they get paid?
- How well are we capturing early-payment discounts to bring our costs down?
- Is our accounts payable (AP) turnover rate good enough to receive credit if we need it?
By asking (and answering) questions on both sides of the payment equation—incoming and outgoing—your finance team can be a key strategic driver for your business decisions.
9 examples of how to use payment analytics
The following examples represent just a small window into how digital payment analytics tools and metrics can drive decision-making and business performance.
1. Remove friction from payment processes
Will your business customers pay you more quickly if you offer new payment types? What about consumers? Will they spend more in your online store if you offer the latest payment trends in mobile payments, online payments, digital wallets, or other payment methods?
When you track payment transactions with real-time data, you'll know whether alternative payment methods—from new payment gateways to American Express points—result in higher revenue. This insight helps you determine what payment type is the most efficient and profitable.
2. Improve the customer experience
For digital payments, fast, easy payment systems are an important part of the customer journey—and equally important to customer satisfaction. Payment analytics can give you a deeper understanding of transaction volume, checkout performance, and payment experience across all your payment channels.
Do some card authorizations fail more often than others? Try making different payment buttons more prominent or leading with different payment platforms to drive a positive impact on sales through checkout optimization.
3. Get paid faster
Do you offer goods or services on credit, whether to business customers or consumers? If you provide goods or services to your customers before you get paid, minimizing late payments can be key to maintaining a healthy cash flow.
Monitoring your payment processing can reveal overdue accounts quickly, giving you a more accurate assessment of your business risk and improving your risk management. It can also show you how additional payment channels, such as credit cards, could help your customers pay you on time while delaying their own cash outflows.
4. Solidify your supply chain
For your outgoing payments, payment data analytics can help you make sure those payments are going where they need to, when they need to, prioritizing your relationships with key vendors. In a supply-chain crunch, vendors you've always paid quickly are more likely to prioritize your company in return.
In addition, by tracking key performance indicators (KPIs) like accounts receivable turnover rate that vendors use when deciding whether to extend credit, you can help make sure your company has access to that credit as needed for your business operations.
5. Predict customer behavior
By mining your aggregate transaction data for payment analytics, you can figure out things like which e-commerce offers or discounts drive your maximum revenue, which products do best on which retailers, and how to connect customer interests with the products or services they'll love.
6. Elevate your forecasting
Historical data is a valuable resource in predicting the future. As you learn more about customer behavior, you'll be in a better position to predict demand spikes, helping you avoid production shortfalls or bottlenecks. You'll also learn where your off seasons are, helping you innovate new products or services that can bridge those gaps.
7. Even out your cash flow
Those same data points of spikes and lulls in your seasonal demand can help you predict cash flow surpluses and needs. The more you can plan ahead, the more prepared you'll be to use tools like revolving credit lines from financial institutions to meet your cash needs.
8. Improve your credit score
Thanks to the many ways in which payment analytics help you understand and manage your cash inflows and outflows, the practice can also help you better meet your financial obligations. With a strong payment history, you'll be in a solid position to maintain a high credit score and take advantage of more favorable financing opportunities.
9. Drive business growth
Ultimately, all of these advantages come together to help you drive business expansion. Offer your customers what they want, expand in your strongest markets, bolster your supply chain, and improve control over your finances, giving you access to the capital you need to grow.
Analyze business payments with BILL
If you'd like to have more visibility into your accounts payable (AP), BILL's AP automation software collects and captures your payments data for a more holistic view.
To see how BILL can help your business thrive, schedule a personalized demo or start a risk-free trial today.
Payment Analytics FAQ
What can you learn about your customers from payments data?
Within payment data is information about:
- What payment methods your customers are using
- How much a customer spends in a single purchase or order
- The time to render payment (in accounts receivable)
- The time to process a payment (in a POS system or online payment processor)
- The frequency of purchases
- When they’re likely to purchase
- Time to additional purchases
- Likelihood of refunds or chargebacks
Payment data should always be considered part of customer data. There’s a wealth of value in their payment practices that helps complete the clearest profile of who they are and how they purchase.
What’s included in payments data?
Payments data refers to any data that’s collected in the sales process. The most common information this refers to includes:
- Customer information
- Transaction amount
- Payment method
- Goods or services purchased
- Transactions fees
- Payment processing time and details
- Refund amounts
- Chargeback information
- Payment gateway or processor used
What’s included in “payments data” can vary business-by-business. For example, a business that invoices and manages accounts receivable will include information on time to approval and time to pay.
What are the most important payment metrics?
The most important payment metrics are the ones that help answer the questions that matter to you. However, businesses will frequently track the following:
- Average order value (AOV): How much a customer usually spends on a single purchase, which can be used to determine the profit per purchase and create sales targets.
- Payment conversion rate: What percentage of payments are successfully processed, which is used to determine if a checkout process is faulty and costing the business sales revenue.
- Chargeback rate: What percentage of payments are disputed and refunded, which is used to identify fraudulent activity and nip it in the bud.
- Customer lifetime value (LTV): How much revenue comes from a customer over the course of their relationship with the business, which is used to determine customer acquisition budgets and remarketing practices.
- Settlement time: The amount of time it takes for a payment to hit the bank account, which assists in cash flow forecasting and planning.
By tracking these metrics, you’ll have a better understanding of how your payment process is affecting cash flow, and operations. This helps you optimize your operations and maximize the value of every dollar earned.
Can payment analytics help prevent payment fraud?
Payment analytics doesn’t prevent payment fraud directly, but it can help you identify ways to prevent it.
For example, you could identify that a specific payment method is commonly used in conducting payment fraud, or that fraudulent transactions come through a specific sales channel. You may consider no longer accepting payments from that provider or pausing that sales channel until the problem is sorted.
Over time, you’ll have a better understanding of who’s conducting fraudulent transactions and how they’re doing it. With that groundwork, you’ll know where to start to prevent it going forward.
