Christmas is on the horizon. All over Asia, shoppers are getting ready for another busy season. But while it’s a big time for shoppers, it’s even bigger for retail businesses.

With peak season around the corner, maximising profits is more important than ever. The best place to start? Payments.

In 2024, accepting cashless payments – credit cards, debit cards, and digital wallets like Apple Pay and Google Pay – is a must. However, the associated costs, including interchange and scheme fees, can add up. Even a small reduction in fees per transaction can make a big difference to your bottom line.

Below are four ways hidden payment costs might be eating into your retail profits this season – and what you can do to drive down fees and maximise revenue.

The unseen costs of payments costing your business money include:

1. Outdated payment setup.
2. Weak payment fraud detection.
3. Not tokenising your payments.
4. Excessive payment retries.

1. Outdated payment setup

It is an exciting time to be selling online. But, when you sell online (and not only to local customers but overseas, too), several challenges present themselves. The big one? Accepting payments online – especially from international customers – is expensive.

The cost of accepting payments varies widely depending on your payment service provider (PSP). But why is it so expensive? The problem often lies with your backend payment setup. 

Card routing determines which payment network processes your transaction, and incorrect routing can lead to higher fees – especially for cross-border transactions, which can cost more than domestic ones. Local acquiring, which routes payments through banks in the same region as your customer, can help reduce these costs.

Ask your PSP if they offer local acquiring to reduce fees. Checkout.com processes domestic payments in nearly 50 countries, offering local acquiring to save on international transaction fees and boost acceptance rates. Additionally, Checkout.com’s intelligent routing automatically sends transactions through the most cost-effective networks in real time.

Another hidden cost lies in misassigned Merchant Category Codes (MCCs). Each business that accepts cashless payments is assigned an MCC by card schemes such as Visa and Mastercard, which classify the type of goods and services you provide. However, an incorrect MCC can lead to higher fees. As the assignment criteria often get updated, it’s essential to ensure you’re categorised correctly.

Review your business’s MCC with your PSP to avoid unnecessary charges. Checkout.com’s dedicated team ensures compliance with local and international schemes, helping retailers avoid fees associated with incorrect MCC classifications.

2. Weak payment fraud detection

Fraud is on the rise, especially online. A 2024 LexisNexis study found that, across Asia Pacific, digital channels accounted for over half (51 per cent) of overall fraud losses, overtaking physical fraud for the first time in history. As billions of consumer dollars are lost to scams in 2023, businesses also face significant losses in the process.

For retailers, fraud often leads to chargebacks. A chargeback happens when a bank refunds a customer for a fraudulent transaction. When that happens, not only do you lose the sale and the product, but you’re also on the hook for a chargeback fee, which can range from $20 to $300 per case. On average, Asia Pacific retailers lose an additional $3.95 in extra costs for every $1 lost to fraud. Imagine what that adds up to during peak season when businesses often see an uptick in chargebacks – it would cost thousands in fees if no strong fraud detection is set in place.

But the flip side is equally challenging – overzealous fraud systems can block legitimate customers, leading to false declines. Checkout.com’s research shows that almost half (45 per cent) of customers won’t retry a payment after a false decline – costing you both the sale and the customer’s trust.

With this dilemma, what do you do? Don’t strive for a stronger fraud detection tool. Strive for a smarter one.

Checkout.com’s Fraud Detection Pro uses machine learning and custom rules to strike the right balance, filtering out fraud while reducing false declines. Tools like 3D Secure (3DS) and Address Verification Service (AVS) can further enhance fraud prevention and improve relationships with card schemes, potentially allowing you to secure lower payment processing rates going forward.

3. Excessive payment retries

Re-attempting a payment that has failed is an uncomfortable experience all round. For the customer, it’s frustrating. For you, as a merchant, it costs you money – each retry incurs fees and they can add up fast.

To avoid unnecessary retries, pay attention to response codes, which tell you why a payment was declined. If the issue is minor, you can allow the customer to retry. But if it’s more serious – like an invalid account – continuing to retry will only increase your fees.

Checkout.com’s scheduled retries attempts a failed payment at a more optimal time based on data, increasing the likelihood of success. This feature has helped Checkout.com merchants recover up to 20 per cent of failed payments through scheduled retries – resulting in hundreds of thousands in saved fees and revenue uplift.

4. Not tokenising your payments

Tokens act like a temporary key that keeps your customer’s card information safe during a transaction. Think of it as giving someone a spare key to your house for a one-time use – it’s safe, secure, and won’t work again. Tokenisation replaces sensitive card data with secure, randomly generated codes – known as tokens. This process makes the transaction more secure and reduces fraud risk.

Using tokens drives down your payment costs in several ways: 

1. It offers enhanced security, minimising fraud and reducing chargeback fees. 
2. Tokenised payments come with lower interchange fees, particularly in high-risk card-not-present transactions like e-commerce.
3. Tokenisation can boost your authorisation rates. Visa research suggests a 2 per cent uplift in authorisation rates for tokenised payments, but Checkout.com’s merchants have seen increases closer to 3 per cent.

For businesses that rely on recurring billing – such as subscription services – tokenisation can make a big difference in keeping transactions secure and profitable.

Want to learn more about tokens, and how they’re saving Asian businesses on their payment processing costs? Explore Checkout.com’s Network Tokens today.

Recoup the hidden costs of payments with Checkout.com

Looking ahead, it’s an exciting time to be an Asian business. The rise of e-commerce is undeniable in the retail industry in Asian business – according to research by Google, Temasek, and Bain & Company, the Asian e-commerce sector is on track to reach a value of US$172 billion by 2025. This is driven particularly by the adoption of cutting-edge technologies and changing consumer preferences. 

As sales increase during peak season, so do payment costs. Checkout.com’s free payment audit tool can help your business optimise payment setups, improve acceptance rates, and reduce processing costs.

For more in-depth strategies, download Checkout.com’s guide to optimising interchange and scheme fees. It covers excessive retries, incorrect MCC classification, and a lack of tokenisation in greater detail, with in-depth looks at chargeback fees, local acquiring, and how collecting additional transaction data can increase your acceptance rates.

Don’t let hidden fees eat into your profits. Chat to the team at Checkout.com today to explore how your business can thrive in the digital economy – while paying less for payments.