Small business owners have a lot of data available to them to support decision-making and operations. One set of great importance is payment analytics. You can gain many insights from this information, as it sheds light on costs, cash flow, and customer preferences. 

In this article, you’ll learn about the basics of payment analytics. Building on this, you’ll review the benefits this data can offer small business owners. At the end, you’ll gain tips on how to best evaluate tools that generate analytics. 

Payment Analytics 101 

What are payment analytics? To start the discussion about their value, you must first understand them. 

Payment analytics come from collecting and analyzing payment data. When someone purchases goods or services from you, the transaction creates data. 

Within each payment, there’s lots of data to collect, including: 

• What did the customer purchase 
• The amount of the transaction 
• When the customer made a purchase (time and data) 
• Where did the purchase occur (in-store or online) 
• The type of payment used (cash, credit card, debit card, ACH, etc.) 

How Do Payment Analytics Work? 

Payment analytics are a tool for business owners. It’s a way to make your data more actionable. You can analyze spending patterns and identify trends across transactions. Ultimately, you want to know why, how, where, and when customers pay. 

To learn this, you need technology to collect and analyze data. Reporting generated from tools power payment analytics. These systems collect data across all transactions. They then merge this information to provide: 

• Trends in payments 
• The percentages of payment types 
• Transaction volume and speed 
• Decline rates and chargebacks associated with credit card payments 

To understand payment analytics and their interpretation in terms of growth and cash flow, you’ll need a robust system. It should be able to collect information and aggregate it for analysis. 

Why Payment Analytics Matter 

There are many reasons payment analytics benefit you, and we’ll explore those in more detail below. In short, though, it’s business intelligence. Payment insights offer visibility across transactions. You’ll be able to find patterns and then determine how they impact profits. It’s a way to track all payment types and categorize them. 

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In addition to supporting financial performance, payment analytics can also assist with operational efficiency. They uncover any friction in the process. Enhancing these interactions can improve customer experience and loyalty too. 

This information can also be a way to mitigate risk from payment fraud. This is an expensive and pervasive problem. 

Overall, payment analytics fuel strategic decision-making. You can use them to plan for long-term success and growth. A modern small business must use data like this to be competitive and stay in the know about transaction trends. 

Any business data can contribute to your success. It tells the story of how, when, and where people pay you. This information creates opportunities for improvement. It can influence the payment experience and how you market. 

8 Ways Payment Analytics Benefit Small Businesses 

Now that you know the basics and what information payment analytics offer, let’s dive into how they benefit your business. These benefits cover almost every aspect of your business, bringing visibility into transactions and payments. 

1. Improve Cash Flow and Profitability 

Cash flow literally fuels your business. Payment analytics show what’s helping and hurting this metric. 

You will know payment type preferences, speed, and average transaction amount over time. What are the patterns and trends? Are there any shifts in this that indicate something about customer retention and their lifetime value? 

You can use payment analytics to support improvement in specific KPIs (key performance indicators). If your goal is to increase transaction values, track how people pay and what promotions they use. 

Payment analytics also unlock profitability insights. There are several metrics that can improve how much revenue becomes profit, including: 

• Processing speed: If it’s too slow, you risk cart abandonment. Before making changes, simulate some transactions to see what the issues are. It could be integrations or formatting of transaction data. 
• Authorization rates: Very low or high percentages could be cause for concern. If it’s too low, there may be issues with tokenization. If very high, it could indicate fraud patterns. 
• Chargebacks: Chargebacks impact profits. You can lose the sale and spend considerable time investigating. If these trend up, payment analytics provide specifics on card type, bank, payment method, and more. It can help you build a strategy to prevent them. 

2. Set Strategic Pricing and Product and Service Offerings 

Pricing and offerings must be competitive with your audience. They have many choices no matter your industry. Payment analytics uncover when they buy and at what price. 

What you charge may vary, so these are indicators of what your customer base will pay for your services. You can also see what products or services they purchase most frequently. 

This information can support higher conversions. While you use lots of customer data to reveal this, payment analytics offers more context. 

FROM OUR PARTNERS: Proactivity in Payments: 7 Tips Merchants Can Use for Higher Conversions 

3. Optimize Billing and Payment Collection Practices 

How easy is billing and payment for you and your customers? Payment analytics can answer this question too. 

You’ll have information on how and when they pay. You may identify difficulties in the process that cause payment delays. This data gives you guidance on dissecting billing and payment collection. 

From this, you can establish improvements, including things like subscription billing. It’s automatic payments for you and convenient for your customers. 

RELATED ARTICLE: The Ultimate Guide to Subscription Billing Setup for Independent Contractors 

4. Make Informed Financial Projections 

Your growth plan success depends on accurate financial projections. You need to have real-time continuous data on payments to achieve this. 

You’ll collect more information about increased revenue each billing cycle to realize it. Patterns that show spikes or ebbs lay out what you can expect in the future. 

This data, along with economic forecasts and other factors, can be your blueprint for building a more profitable business. 

5. Reduce Fraud and Risk 

Payment fraud concerns small businesses. A 2023 report found that 35% of businesses experienced it.  

Any business should have a way to detect and protect against payment fraud. Analysis of transaction metrics can identify fraudulent patterns. 

On the one hand, you want payments to be easy with little friction. However, you need authentication protocols that would trigger a suspicion of fraud. 

Some things to check as part of the process include: 

• High transaction velocity 
• Ensuring that billing addresses are consistent 
• Failed and retried payment activity 

Some other ways to support authentication include: 

• Verifying email addresses connected to accounts 
• Blocking repeated attempts after two failures 
• Always requiring the input of the three-digital code 

6. Streamline Business Operations 

Payment analytics can also benefit your business operations. With this data, you’ll know common payment methods. You can then consider optimizations for this workflow. 

You can discover what activities on the backend have a lot of manual work. These activities take up time and resources. 

The way to streamline these operations is by improving your technology. Self-service payment portals are an excellent solution. The purchaser controls their account and payments, so you don’t have to collect each month. 

And since you have all this intelligence about payments, you can determine areas for automation. 

Payment solutions that offer automation can remove routine tasks from your plate. It optimizes your processes for greater efficiency. It’s work you don’t have to bother with, so you can concentrate on growing your business. 

7. Market Better 

Another use case for payment analytics is marketing. This reporting relays the details of every transaction. These behaviors, from how they buy to what they buy, can allow you to segment your customers. 

When you can group them, you can market to them better. It’s especially helpful in email marketing. It can also inform targeting around other advertising options like: 

• Display ads 
• OTT/CTV (over-the-top, connected TV) 
• Social media 
• Retargeting 

FROM OUR PARTNERS: How to Use Payment Data in Email Marketing Campaigns 

8. Enhance Customer Experience and Loyalty 

Payment analytics provide information on how people pay and the friction that can occur. This friction can lead to negative experiences, and ultimately abandoning the purchase. 

For example, maybe your data shows you an increasing decline rate. Some declines are appropriate because the customer doesn’t have the funds. Others occur by accident, which could indicate your checkout process has flaws. 

It’s a critical insight because 45% of customers say they will not retry once their payment has been declined. It’s lost revenue that may be avoidable. 

If you learn the reason behind declines and error codes, you can get to the heart of the problem. It could be that your forms are hard to use on mobile or other technical issues. 

Fixing these promotes a better customer experience with little hassle. Something as simple as enabling them to create accounts and store credit card information could be helpful as well. 

When experiences are easy, customers stay loyal to you. If it’s not, they have every reason to look for alternatives. 

Key Tips to Choose the Right Payment Analytics Tools for Your Business 

As you evaluate how to implement payment analytics tools, keep these tips in mind: 

• Define the goals you have for gathering this data and what analytics are most valuable to our business. 
• Determine your budget for adopting new technology. 
• Review how these tools integrate with your current payment platforms. 
• Assess the security and compliance of each solution. 
• Look for specific features like real-time data, custom reporting, and dashboards. 
• Compare the analytical capabilities of each system. 
• Choose a solution that’s easy to use and scalable as your operations grow.