The survey of 200 UK businesses conducted by Dynamic Markets*, found that poorly structured CNP systems were common among UK merchants, in fact almost eight out of ten (79%) financial directors thought that their CNP payment capability had developed in a less than ideal way; a figure which rose to 94% in large organisations. The research also found that 68% of merchants still relied on manual CNP payment processing, requiring staff to process and reconcile CNP data manually, placing a huge strain on finance departments. Incredibly this figure rises to 92% if a merchant traded internationally making it difficult for UK businesses to compete effectively online.
The survey also found that the average number of man-days involved in CNP payment reconciliation was 27.8 days a year. In fact the waste could be even greater with 21% of financial directors unable to calculate how much time staff spend on manual CNP reconciliation. Apart from having a detrimental impact on cash flow it can become a major burden as CNP sales increase, particularly when a company is expanding internationally. The survey findings suggest that, even if hidden costs are low initially, as sales grow the hidden costs spiral in parallel, eating directly into a merchant’s profit.
39% of merchants admitted that they grew their payment systems in an ad-hoc and piecemeal fashion, leading to difficulties in predicting or managing their CNP payments. Many felt that this forced them to use multiple acquirers or PSPs to band-aid their CNP process in order to support new markets or customer requirements. This in turn can cause additional reporting and more manual reconciliation work by finance departments.
“The results from the survey underline that merchants are not aware of the hidden costs connected with e-commerce. Most organisations outside of e-commerce are looking to cut overheads and become more streamlined. It is surprising that UK merchants are still opting to continue with manual reconciliation and patch-work payment systems,” said Shane Fitzpatrick, President and Managing Director, Chase Paymentech Europe Limited.
The survey also found that CNP systems were affecting customer service levels. For example, if a customer had a problem during the checkout process, merchants were unable to automatically advise them why their card had been declined and how to resolve the issue. Finance staff at 87% of merchant companies surveyed felt that a negative customer experience exists where CNP payments are reconciled manually.
“I was pleased to see the research highlight that merchants are finally addressing this short coming, with almost two thirds of non-finance directors stating that it would be worthwhile changing CNP payment provider to automate their payment process. We offer our customers a single source solution that provides them with a range of savings, from the ability to prevent and manage chargebacks electronically, to improving checkout conversions rates with the use of additional authorisation codes – allowing merchants to cut OPEX and expand into new markets quickly and efficiently,” concluded Fitzpatrick.
All interviews were undertaken independently by Dynamic Markets in 2010. This quota of organisations was composed of 30% large companies (250+ employees), 34% mid-sized (50-249 employees) and 37%small organisations (11-49 employees).