KPIs for Ecommerce Payments: What to Measure
Payment Gateways, KPI’s and What Good Looks Like
By 2029, online payments are expected to reach billions of transactions per year. For ecommerce businesses, this means that a seamless and efficient payment process is more crucial than ever. Tracking the right Key Performance Indicators (KPIs) for payments ensures smooth transactions, minimises revenue loss, and improves customer satisfaction.
What Are Payment KPIs in Ecommerce?
Payment KPIs are measurable statistics that track the efficiency, security, and profitability of your payment processing system. They help businesses understand transaction success rates, payment failures, fraud risks, and the overall impact of their chosen payment gateways.
There are two key types of payment KPIs:
- Lagging indicators – These measure past performance, such as chargeback rates and payment success rates.
- Leading indicators – These help predict future outcomes, such as abandoned checkout rates or trends in declined transactions.
Monitoring these KPIs ensures that your payments process is optimised for efficiency, security, and profitability.
Why Are Payment KPIs Important?
Tracking payment KPIs allows ecommerce businesses to:
- Reduce failed transactions and maximise successful payments.
- Detect and prevent fraud before it impacts revenue.
- Optimise checkout flows to improve customer experience.
- Minimise chargebacks and disputes.
- Identify the most cost-effective payment gateways and methods.
The Most Important KPIs for Ecommerce Payments
Here are the essential KPIs every ecommerce business should monitor when it comes to payments:
- Payment Success Rate – The percentage of successful transactions.
- Authorisation Rate – The percentage of approved payment attempts.
- Chargeback Rate – The percentage of transactions disputed by customers.
- Transaction Decline Rate – The percentage of declined payment attempts.
- Average Payment Processing Time – The speed at which payments are processed.
- Shopping Cart Abandonment Rate – The percentage of shoppers who leave at checkout.
- Refund Rate – The percentage of transactions that result in refunds.
- Payment Gateway Downtime – The time your payment system is unavailable.
- Fraudulent Transaction Rate – The percentage of transactions flagged as fraudulent.
- Cost Per Transaction – The fees associated with processing payments.
Let’s explore each in more detail.
1. Payment Success Rate
The payment success rate is the percentage of transactions that go through successfully.
Formula:
(Number of successful payments / Total payment attempts) × 100
A high success rate means customers can easily complete their purchases, while a low rate indicates issues with payment processing, fraud settings, or gateway reliability.
2. Authorisation Rate
The authorisation rate tracks how many transactions are approved by payment processors.
Formula:
(Number of authorised payments / Total attempted payments) × 100
If this number is too low, customers may be facing unnecessary declines due to bank restrictions, fraud prevention settings, or outdated payment information.
3. Chargeback Rate
Chargebacks occur when a customer disputes a transaction and requests a refund through their bank.
Formula:
(Number of chargebacks / Total transactions) × 100
A high chargeback rate can damage your business’s reputation and lead to fines from payment providers. Reducing chargebacks requires clear refund policies, fraud prevention tools, and improved customer communication.
4. Transaction Decline Rate
This measures how often transactions are declined by banks, payment gateways, or fraud detection systems.
Formula:
(Number of declined transactions / Total payment attempts) × 100
Declines can happen due to insufficient funds, expired cards, or fraud detection flags. Too many declines can frustrate customers and reduce revenue.
5. Average Payment Processing Time
This measures the time taken for transactions to be processed and settled.
Formula:
(Total processing time / Number of transactions)
Long payment processing times can slow down cash flow and impact customer satisfaction, especially for businesses with high sales volumes.
6. Shopping Cart Abandonment Rate
Many customers add items to their cart but never complete the checkout process. This KPI measures how often this happens.
Formula:
(Number of abandoned carts / Number of created carts) × 100
High abandonment rates often indicate checkout friction, such as limited payment methods, slow processing times, or hidden fees.
7. Refund Rate
This tracks how often customers request refunds after making a payment.
Formula:
(Number of refunds / Total transactions) × 100
A high refund rate may suggest product issues, misleading descriptions, or dissatisfaction with the payment experience.
8. Payment Gateway Downtime
This measures the time your payment processing system is unavailable.
Formula:
(Total downtime hours / Total operational hours) × 100
Frequent downtime can cause missed sales opportunities and damage customer trust.
9. Fraudulent Transaction Rate
This tracks how many transactions are flagged as fraudulent.
Formula:
(Number of fraudulent transactions / Total transactions) × 100
High fraud rates can lead to chargebacks, financial losses, and reputational damage. Implementing fraud detection tools can help mitigate risk.
10. Cost Per Transaction
This KPI calculates the total cost of processing each payment.
Formula:
(Total transaction fees / Number of transactions)
Lowering transaction costs can improve overall profitability. Comparing different payment gateways can help reduce fees.
Wrapping It Up
Focusing on payment-specific KPIs helps e-commerce businesses streamline transactions, reduce fraud, and boost revenue. By tracking and optimising these metrics, you ensure a seamless payment experience for your customers while improving profitability. Stay proactive in monitoring and adjusting your payment strategies to stay ahead in the e-commerce space.
