Top 5 problems with online payments in 2024
Online payments are becoming increasingly popular. According to Statista, the total transaction value is expected to grow at an annual rate (CAGR) of 9.52% from 2024 to 2028. This growth will result in an estimated total amount of $16.62 trillion by 2028.
However, this growth is hindered by problems of online payments businesses face, including security concerns, mounting fees, regulatory compliance, and ensuring smooth customer experience. Entrepreneurs and startup owners must understand and address these issues to reduce costs and improve customer trust and satisfaction.
In this article, we examine the five main challenges of online payment, providing insights and solutions to overcome them.
Sending and Receiving Payments Online: How Does It Work?
Before we explore the challenges of online payments, let's take a closer look at the digital transaction process.
Initiating a transaction. The customer selects a product or service on the website, goes to the checkout page, and thus initiates the transaction process.
Entering payment information. The client enters the credit card or digital wallet data into the payment form. The cardholder's payment information then goes to the payment gateway.
Encryption of payment data. After receiving confidential client data, the payment gateway encrypts them. Usually, it uses secure protocols such as SSL (Secure Sockets Layer).
Verification and authorization. The encrypted payment data is securely transmitted to the payment processor or acquiring bank. Then, it undergoes a thorough test. The acquiring bank verifies details and the availability of funds or credit limits to ensure a secure transaction
Authorization request. The verified information is again passed through the payment gateway and forwarded to the customer's bank. Thus, it confirms the processing of the transaction.
Approval or decline. The issuing bank reviews the authorization request and, if it does not notice the fraud risks, approves it and debits the money.
Transaction processing. If the transaction is approved, the buyer's bank sends an authorization code back to the payment processor through the payment gateway. The code confirms the transaction has been authorized, and money can be debited. The purchase amount is deducted from the customer's account and transferred to the seller's account.
Confirmation. Immediately after a successful transaction, the payment gateway sends a notification to the merchant indicating that the payment has been received and the order can be fulfilled. The gateway will also send a notification if the transaction is declined.
Top 5 Problems of Online Payments in 2024
Digital payments allow for secure, fast, and easy transactions that suit merchants and their customers. However, the process still has some pitfalls. Let’s examine the five challenges of online payment businesses will face in 2024.
Security Threats
As the world becomes more digital, the amount of information shared about consumers also increases. This growth makes transactions easier. But, it brings significant risks for customers and merchants.
Online payment systems, such as credit transactions, digital wallets, and online banking, are prime targets for cybercrimes. These include identity theft, phishing, and data breaches. According to Juniper’s Research, companies risk losing over $362 billion globally due to these frauds between 2023 and 2028.
Therefore, businesses must pay much attention to security measures. They should provide encryption, two-factor authentication, fraud detection and prevention systems. Hiring a fintech software development company would be the smartest choice to ensure protection.
It is also crucial to update payment platforms often. This keeps them current with technology and able to secure against its weaknesses.
The "Twins" of Banking Sites
"Twin" sites are fake websites that mimic legitimate ones, causing significant issues for online payments in 2024. These sites trick users into entering their login credentials and allow scammers to access their real accounts.
For example, a customer visits a bank's twin site. They might unknowingly enter their username and password. Scammers then use this info to link the victim's mobile banking to their phone. This scam can lead to significant financial losses and compromised personal data.
Companies also need to play their part in maintaining online security. This means having an updated list of legitimate URLs and communicating any changes to their customers. Doing so ensures their clients are always aware of the correct web addresses, which is a crucial step in preventing "twin" site scams.
Cross-Border Payments
Doing business internationally introduces some additional problems of online payments. Cross-border transactions often involve currency conversion, extra fees, and regulatory compliance. In 2024, managing cross-border payments efficiently is a major challenge.
Some of the issues businesses face include delays, high costs, and lack of transparency. Startups that want to expand globally need to understand the details of international payments. Partnering with global payment providers can help streamline the process. However, you also need to conduct thorough research and due diligence.
Processing Fees
Transaction fees are the costs associated with processing payments and can burden small businesses and startups. But, you can reduce them. It depends on which payment processors and methods you choose.
The cost of online payment processing will remain high in 2024. Payment service providers (PSPs) charge ranging from 1.5% to 3% per transaction.
Businesses that are already on a narrow profit margin may find that these fees greatly cut their profits. Entrepreneurs and startup owners need to consider their payment service providers carefully. Some of them may even include monthly usage fees. Choosing major banks to process transactions and encouraging buyers to use debit cards also helps reduce costs.
Customer Service
Many consumers expect quick and comprehensive support for their payment issues. According to a Salesforce report, 88% of clients mention that a company's experience is as important as its products or services. Poor customer service leads to abandoned purchases and dissatisfaction.
For instance, older buyers repeatedly face accessibility issues with online payments. Large banks have addressed this by implementing chatbots, which provide instant support. However, smaller businesses frequently need to catch up in offering such solutions.
Companies must invest in reliable customer support to create a seamless payment experience. This ensures client loyalty and satisfaction, even when issues arise.
How Do Integrio Services Help Prevent Online Payment Problems?
Integrio is a software development company that creates innovative tech solutions in different areas. We offer multiple services to help prevent problems of online payments.
Enhancing Security Measures
Implementation of Advanced Encryption. We use state-of-the-art encryption techniques and cybersecurity tools like CrowdStrike Falcon and Okta. So, all sensitive information, such as credit card numbers, is transformed into a code that only authorized parties can read.
Fraud Detection and Prevention Systems. We help to employ sophisticated fraud detection systems and artificial intelligence (AI). By examining data in real time, AI-driven fraud prevention tools can spot and flag suspicious transactions.
Secure Authentication Methods. We put in place advanced secure authentication methods. It could be two-factor authentication (2FA) and biometric authentication, like fingerprint scanning. They have become a vital security measure to prevent unauthorized access.
Improving Transaction Speed and Efficiency
Optimized Payment Gateways. We optimize payment gateways to handle transactions swiftly and efficiently. Therefore, payments are processed quickly, reducing transaction failures and improving customer experience.
Ensuring Regulatory Compliance
Compliance Management Tools. We understand and comply with PCI DSS, GDPR, and other requirements, ensuring your business operates within the law.
Automated Reporting. We use automated reporting solutions that generate detailed reports on transactions and compliance. This helps businesses maintain accurate records and effortlessly meet regulatory requirements.
Ensuring System Scalability and Reliability
Scalable Infrastructure. We create scalable infrastructure solutions for growing transaction volumes.
High Availability Systems. We integrate with reliable payment processing tools like Stripe, Paypal, Square, Apple Pay, and Google Pay. We ensure that payment systems are always ready to process transactions, minimizing downtime.
Data Analytics and Insights
Transaction Analytics. We work with MySQL and MongoDB databases and employ data analytics tools like IBM SPSS and FINCAD. Our transaction analytics help businesses understand transaction patterns. It also helps them identify trends and make data-based decisions to upgrade payment processes.
Customer Behavior Analysis. Without solutions for customer behavior analysis, businesses can improve user experiences by analyzing how clients interact with payment systems. This also helps them develop better marketing strategies.
Integration with Other Financial Solutions
Banking Systems. We integrate with various banking systems to ensure smooth transactions between businesses and banks.
Payment Gateways and Processors. We work with multiple payment gateways and processors, ensuring safe transactions and providing your customers with a wider range of payment options.
Accounting Systems. We integrate with accounting systems, streamlining financial management and simplifying reconciliation.
Face Online Payment Challenges with a Reliable Tech Partner
Online payments are vital for modern businesses, yet they have several challenges. Security threats and fraudulent activities require constant vigilance and advanced security measures. Other problems of online payments, such as high fees, hurt profits. Finally, cross-border payments introduce additional complexities that need careful management.
Addressing these problems requires a multifaceted approach. Businesses must invest in robust security systems and fraud detection technologies. Ensuring reliable payment processing and negotiating better transaction fees are crucial. Partnering with experienced global payment providers can make a significant difference in international operations.
Integrio has extensive experience developing fintech projects from scratch and modernizing existing solutions. Contact our experts to understand the possibilities and overcome your payment challenges.
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