Payments Key Performance Indicators (KPIs): A Basic Perspective

Editor's Notes

• #3: This is a teaser/ opening joke to show that there is a lot of information available on the MRC website and in books like David Montagues etc. This will set the stage for the fact that we only have 45 minutes to cover a huge topic so this session will look more at the evolution of how KPI’s have changed and its an exploration of new ways to think about the value of KPIs going forward in an industry that is rapidly evolving with very huge effects on retailing.
• #4: MRC Vegas 2016 Presentation Title of Session: A Basic Perspective of KPI’s and internal dashboard information   KPI’s or Key Performance Indicators are often complicated, confusing and lack standardization across merchants and vendors.  This session will bring focus on typical KPI’s, how they are calculated and some of the reasons for variances in the industry.  The goal is to provide fraud managers and others with the insights and typical formats so that attendees have what they need to better understand how to create unique views into fraud shop performance. Industry veterans from online retailers and service providers will start at the beginning and walk through the basics of KPI development for daily, weekly, monthly and annual reporting.  Discussion will cover specific differences by market verticals and product concentrations (digital vs physical products). In addition, examples of typical KPI sets will be reviewed.  KPI topics to be covered include: Risk Deny Rates, Manual Review Rate (“Outsort Rate”), Calculating your Fraud rate, Bank Authorization rates and what they mean, Understanding False Positive rates and many others. Key Takeaways:                                                                                                        Understand what KPI’s are and how they are important to you and your business decisions See how a variety of KPI rates and indicators are calculated and why they vary from business to business Understand the pitfalls of trending analysis and when not to compare your KPI’s to other in your industry How to create a set of KPI’s that will drive change and support new initiatives in an environment where change is the only constant
• #5: What are KPIs and why do they exist in the first place? Goal is to be able to assess where merchant is at any point – health of business, etc. But are your KPIs a catalyst for change?
• #7: Do merchants need to compare their KPIs to other companies? Why are they so hard to standardize? Unlike some other industries (e.g. banking /FASB) there is no real governing authority to provide guidance and compliance The ecommerce business models that have evolved have only one thing in common – they are unique to that entity. Refer to the MRC EU KPI project that was a offshoot of the benchmark committee. When the Benchmark committee tried to find common points of comparison the problem became apparent that not all merchants calculate the same way or collect the same information. One can conclude that ecommerce evolved as individual entities with total disregard to any industry standards. When it comes to fraud issues all of the vendors customize solutions for each client thus causing stats to skew even more.
• #8: Look at the touchpoints of a transaction to understand where we should focus data collection and ongoing monitoring. What are the buckets we need to consider where we collect, sort and filter the data? For each category of KPI’s that we can collect, consider the depth of the data for instance: Bank auth could be looked at in a simplistic way such as total decline or total accept, but, it could go deeper and provide more decisionable information if it was broken down by BIN (issuer banks), reason codes and geographical or product data. This approach then opens up new ways to compare data into new views. Looking at only the transaction flow limits us to looking inward Merchants must change their perspective of the world and their business to incorporate a wider view of their opportunities.
• #9: What is the output of merchant data that can provide actionable information? It’s important to understand what the consolidated output will be and the use cases for change or action. What data calculations will provide the basis for research and ultimately to make significant changes to the strategic and financial direction of your operation?
• #10: Begin with the basics of data collection and comparative calculations. You may get your KPI’s from your service provider, review and revise annually at minimum.
• #11: Our standard KPI models have served us well to view our current state and look back at trends, but may not full fill the needs we have for looking forward, since KPI’s are typically only a reflection of a short historical window only looking into our businesses. Often not looking outward to industry trends, sales volumes and projections. Let’s look at our own use case for tracking success, changes, monitoring for anomalies and so on. As we know the industry move quickly and new services and options become available all the time. How do I determine I need to make changes, add services re-examine my whole operation? Do my KPI’s prepare me and keep me up to date on my successes and gaps?
• #12: This slide makes a point of showing the comparisons and how they will differ depending on who the comparison is made to. How do my KPI’s compare to others in my category or size or product mix? What valuable takeaways can I achieve by comparing to others? How do large scale studies guide merchants? Often KPIs are unique to the merchant and their internal needs. Change is constant in ecommerce and it includes more variables affecting payment and risk cost control. New products emerge on current operations processes, shift from physical to digital products is an example. Leads back to the European study and not being able to come up with standards. Most often you best guide for comparison is to ask your vendors or other resources who have
• #13: How change impacts KPI’s and how you need to re-think what is tracked and compared. This chart show how via an example the data changes over time. Then a new digital product is launched and the chargebacks rise, bank denial rate rises, old volume drops, etc. All KPIs are affected when a new product is introduced. Also note that the order review started dropping off since the new digital product didn’t require order review.
• #14: KPIs can be used to focus on both internal aspects as well as the external forced influencing our business needs and practices. E.g. Setting KPI models for external forces is not an uncommon concept. We all must abide by the Visa 1% chargeback rule which forces us to measure our processes in relation to how we monitor our chargebacks to comply but this also has a compounding effect of forcing us to monitor and adjust other related metrics. Such as Acceptance rates, deny due to risk rates, bank decline rates and so on.
• #15: This slide is the pivot slide to new services being offered in the marketplace and how past decisions were challenging but new services will make it even more difficult unless good data is collected and used to anticipate future changes.
• #16: This is the pitch for complete outsourcing and how the next big thing will be machine learning, expensive analytic teams, shared data and experiences and finally full indemnification.
• #17: This is the final wrap-up conclusion to the session: Key points: Use KPI’s for monitoring but also an objective long range view of your operations Don’t be afraid to change the data or calculations if current method no longer provides useable information Be cautious of comparing your operations to any others, even in the same vertical Also be cautious of comparing to industry benchmarks or surveys. We know that there is no current standard across ecommerce merchants / businesses for collecting and calculating data Create your own case study scenarios for change by incorporating KPI’s, thus, testing if you have the correct or best information for change.
• #18: This slide can be used during the questioning period or if the preso goes short in time we can add details to these numbers and tell a story of the trends and predictions of the industry.