Key Performance Indicators: Valuable Tools for Measuring Performance
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Transcript of Key Performance Indicators: Valuable Tools for Measuring Performance
Key Performance Indicators: A Basic Perspective
Presented by
Chris UriarteChief Payments and Product OfficerVesta Corporation
How to calculate KPIs# KPI Calculation1 Post SettlementFraud Detection Rate # of "no" from "Approved" from PreSettl + PostSettl / # of "Customer FINISHED Checkout" # of orders cancelled as fraud / total number of
orders taken1 Pre Settlement Fraud Detection Rate # of "no" from "Approved" / # of "Customer FINISHED Checkout"2 Payment Reversal Fraud (manual) Review Rate # of "YES" from "RealtimeMerchant Detection…" from PreSettl+ PostSettl+ PayReversal/ # of "Customer FINISHED
Checkout"no. of orders reviewed real-time or offline / total number of orders taken2 Post SettlementFraud (manual) Review Rate # of "YES" from "Realtime Merchant Detection…" from PreSettl + PostSettl + PayReversal / # of "Customer FINISHED Checkout"# of orders
eviewed/total # of orders taken2 Pre Settlement Fraud (manual) Review Rate # of "YES" from "Realtime Merchant Detection…" from PreSettl + PostSettl + PayReversal / # of "Customer FINISHED Checkout"3 Pre Settlement Validation Rate # of "YES" from "TXN details validated…" / # of "Customer FINISHED Checkout"# of TXN "yes" validated / total # TXNs attempted (successful and failed)
4 Pre Settlement Authorisation Rate # of "YES" from "Payment authorised" / # of "Customer FINISHED Checkout"# of "Yes" successful TXNs / total # TXNs attempted5 Pre Settlement 3rd Party Conversion Rate (Authentifiaction) # of "YES" from "Successfully authenticated" / # of "Customer FINISHED Checkout" should be against total # TXNs attempted
(successful and failed)6 Pre Settlement Confirmation Rate # of "YES" from "Order Confirmed" / # of "Customer FINISHED Checkout" should be against total of all orders attempted so including
successful and failed.7 Post SettlementCollection Service Rate # of Invoices from "Collection Service" / # of "NO" from "Settlement Successful?"7 Post SettlementCollection Service Rate # of Invoices from "Collection Service" / # of "NO" from "Settlement Successful?"8 Post SettlementPaid / Settlement Rate # of "YES" from "Settlement Successful" / # of "Order Confirmed" agreed9 Post SettlementRetry Success Rate # of transactions successfully retried/total # transactions retried10 Payment Reversal Reversed / Chargeback Rate # of "Payment reversed by Customer or Issuer" / # of "Order Confirmed" agreed11 Payment Reversal Representment Success Rate # of chargebacks won/total no. of chargebacks represented12 Payment Reversal Dispute Success Rate same as above?13 Payment Reversal Refund Rate # of "Payment returned to customer" / # of "Order Confirmed" agreed14 Payment Reversal Collection Paid Rate # of "YES" from "Collections Paid?" / # of "YES" from "Collections Service?"
What are KPIs? Why are they important?How KPI rates and indicators are calculated, and why they vary from business to businessThe pitfalls of trending analysis and when not to compare your KPIs to others in your industry
We’ll discuss…
Using KPIs to drive change and support new initiatives in an environment where change is the only constant
Typical KPIs• Risk deny rate• Chargeback rate• Bank auth rate• Review rate
What are KPIs? Why do they exist?
Risk decline rate
13% - 20%2013 - 201412%
Chargeback rate
2014
2014
85%
Acceptancerate
The case for KPIsBenefits• Enable business decisions to be
tied back to trends• Alert a merchant to potential
problems, challenges and roadblocks that may arise
• Focus KPIs down to employee performance level
• Provide reasoning and justification for budget planning, hiring, and expansion
• Monitor third-party vendor performance
• Measure outside influences
Downsides• Collecting too much data can make it
difficult to interpret• Focusing on micro views can degrade
overall business decision making• Looking at too many KPIs may
overcomplicate the value (analysis paralysis)
• Creating and maintaining KPIs can be a great deal of work
• Interpreting KPIs can be a challenge and can produce unintended outcomes
KPIs: The good, the bad and the Holy Grail• Problems with KPIs – MRC EU benchmarking committee discoveries– Merchants do not collect the same information– Merchants are not consistent in how they calculate KPIs– Business models vary widely; e-commerce is still the Wild West• Transaction processing flows vary widely from merchant to merchant– Transaction flows and vendors vary from merchant to merchant– Identify the transaction flow as the starting point to ID data
collection points or areas of focus
N N
Where do KPIs come from?
REVERSAL CHARGEBACKRECOVERY
CHARGEBACKREVIEWRISKDECLINE
REVERSAL RATE
CHARGEBACKRECOVERY RATE
CHARGEBACKRATE
REVIEWAPPROVE / DECLINE
RATERISK DECLINE
RATEBANK
AUTHORIZATIONRATE
Y Y
PROCESSOR DATA
FEEDCUSTOME
R SERVICE
DISPUTE AND
COLLECTIONS
Y
SHIPN
BANK AUTHORIZATION
Calculating KPIs: Examples• Defining the data collection process and the data
– Define each data element up front, where it comes from, and level of confidence
– Ensure consistency over time– Define what the KPI represents and what inference can be drawn
from it– Are you looking at transactions, value, comparative time periods,
percentages?• Typical KPIs
– Attack rate: concentrated attempts which result in high deny rates
– Approve/deny rate: for bank authorizations, risk system, order review
– Conversion rate: Percent of successful orders cleared and shipped– Chargeback rate: Map rate vs. run rate, % of orders, $ amount,
transaction nos.
Typical calculation equations: Examples• Risk deny rate: # of orders denied by my risk solution by
reason code– Total of orders or % of total transactions• Bank authorization deny rate, adjusted for re-submissions?– Track the reason codes, track by BIN number, trend over time
• Chargeback rates– Map rate or run rate or both, trend over some time period, return
reason codes (may indicate processing or setup problems)• Risk deny review rates (false positive KPI)
– Effectively track the good orders that are denied by risk system or order review
Checklist: Do my KPIs support my business needs?
Are my KPIs actionable? Do I look externally? Can I use my KPIs for
continuousprocess improvement?
Can my KPI strategy predict the future?
Do I track external trends? What can I draw from external
studies/surveys?
How do my stats compare?
ACCEPTANCE RATE
RISK DECLINE RATE
MANUAL REVIEW RATE
CHARGEBACK RATESEGMENT
97% 3% 6% 8%PHYSICAL
85% 20% 0% 12%DIGITAL
90% 8% 5% 5%TRAVEL
70% 18% 0% 4%GAMING
What happens when a new product launches?
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q40
0.20.40.60.8
11.21.41.61.8
2
Trans Vol.BankDenyRiskDenyReviewChargebackNew Prod
Redefine your KPIs for actionInternal View Look within your own operation• Traditional KPIs• Staff performance• Conversion rates• Total cost of operations/payments• Add list of calculated KPIs from EU
External ViewLook beyond your own operation• External studies and surveys• Vendor market trends• Vendor performance KPIs• KPIs that support new solutions
Anticipate changes, make decisions• KPIs must support decisions for change• KPIs must be comparable to evaluate change• KPIs should be forward looking in order to anticipate changes in time to actually make them and achieve success• Fraud, transaction volumes and cost containment will be the most impactful changes• The next wave of solutions will include more dependency on outsourced providers
Looking forward• Ten-year industry evolution in fraud
and payment solutions
• Shared data schemes: The last big thing?
• Today it’s the rise of machine learning that will enable the next big change– Outsourced machine learning– Full indemnification of all fraudulent
transactions, chargeback losses fully covered by service provider
• A forward-looking KPI strategy will provide the right information to make changes early and reap the greatest benefits
ConclusionLeverage your KPIs to focus on both internal aspects and external forces influencing business trends, needs and practicesComparing your KPIs with competitors must be done carefully Check KPIs of industry trends before changing operations, adding new services or outsourcing major components of your businessKPIs for current state are critical but look forward to create new KPI views, competitors, vendors, outside forces and trendsMarket KPIs for third-party vendors and tools are more important than ever
Thank youChris UriarteChief Payments and Product OfficerVesta Corporation
www.trustvesta.com
Chargebacks andfraud consume
13-20%of operational costs
2013Payment fraud
cost merchants
$32B
2013
$2.8BActual CNP fraud losses
Nearly HALF
of digital goods
merchants worry about
mobile payment risk
2013-2014Fraud increased
38%2018
$6BPredictedCNP fraud
2015 Online sales
accounted for
50%of total retail sales