What success metrics would you use to measure a payment gateway product?

Generally the goal of a payment gateway business to maximize revenue which can be achieved by two ways : maximizing volume of transactions or maximizing payment volume.

Payment Volume is more important considering that is what contributes the actual revenue. Since revenue is a percentage of the processed volume.

Customer Journey

Onboards on the platform > Integrates the product > Completes testing > starts processing transactions > may or may not switch volumes to other payment gateway.

Transaction lifecycle

Redirection to Payment Gateway from Merchant > > basic validations> risk checks > authentication > authorization > capture / refund > settlement out to merchant for transactions

Metrics based on Customer journey

Awareness & Acquisition

Number of unique visitors
Number of merchant signups
Time to onboard merchants (may have dependency on banks)
Average Time to integrate Payment Gateway
Number of activated merchants (transacted atleast for a week)

Retention

R-60 , R-180, R-365
monthly transacting merchants
weekly transacting merchants

Usage

Number of transactions processed daily
Number of transactions processed monthly

Revenue

Volume processed quarterly
Volume processed monthly
Revenue quarterly
Revenue monthly

Transaction level metrics

% successful transactions

% transactions failed due to technical failures

% transactions cancelled

% transactions denied due to risk

overall success rates = (successful txns / total transactions ) * 100

transaction split by scheme, payment mode, bank (NB)

Considering the goal, the northstar metric is volume processed.

Important metrics

Revenue monthly quarterly annually

Volume processed monthly quarterly annually

Number of new activated merchants monthly quarterly annually

Success rates

monthly transacting merchants

R60, R180 and R 365

Santhosh Kumar · Answer 2 · 2021-10-03T18:51:05+0000

Payment gateway collects the payment information such as credit/debit card details and the submit the information to the payment processor. Payment gatway also facilitates the communication between the payment processor, credit card companies, and merchant acquiring bank.

Payment processor authorizes the card information, checks for a fraudulent activities, and moves the fund between the customer and merchant bank.

Finally, it sends the approved or declined status to the payment gateway.

Business goal:

I assume the business goal is to ensure that payment gateway faciliates the resolution of all the customer transactions.

Actions:

I would assess the activities that are associated with the payment gateways such as a) transactions associated with different types of debit and credit cards b) transactions associated with different types of payment processor c) transactions associated with differnt type of merchant acquiring banks and customer issuing banks

Metrics:

I would measure the metrics associated with above mentioned actions

a) I would measure the total number of transactions that are successfully processed by the payment gateway

b) I would measure the total number of transactions that are not processed by the payment gateways.

I would measure the foregone fee revenue associated with the transactions that are not processed. For which, I would measure the breakdown the transactions that are not processed due to a) incompatible debit or credit cards and quantify the associated lost fee revenue, b) incompatible payment processor and quantify the associated lost fee revenue c) incompatible merchant and quantify the associated lost fee revenue d) any combination of these three above.

Evualuations:

Forgone revenue is one piece of the puzzle, becuase there is a incremental cost associated with starting doing business with the payment instruments that are currently incompatible with.

I would measure the fee revenue lost due to not communicating with payment instruments such as a) credit/debit cards, b) payment processor, c) merchant and customer banks, d) any combination of these three, that are not compatible with currently based on the volume of the transactions that are not processed (forgone revenue)

Then I would measure the cost of doing business with these incompatible payment instrumetns (incremental cost of doing business)

I would start accepting new payment instruments (debit/credit cards, payment processors, merchant and customer banks) when forgone revenue is higher than incremental cost.

anand mani · Answer 3 · 2020-11-14T00:12:19+0000

My understanding:

A payment gateway product is a service provided by either a company or e-commerce provider that authorizes the card transactions by serving as conduit between the card issuer, bank and the merchant/e-commerce site/Point of Sale/Voice activated front end.

Clarification:

1. Is the service provider a bank itself?

2. Is it a third party provider hub - Yes

If this is a hub then it can be modelled as a two way market place

1. Payment provider should have relationships with banks

2. Payment provider should have clients (merchants, any channel)

Foundational Metrics:

Payment processing side

# of back end bank system integrations - More integrations the better. Merchants have different bank associations and having more banks integrated essentially means having a wider merchant base.

Merchant side

Number of channels currently supported - At the minimum (E-commerce/web)

The transaction flow is split into two parts for brevity sake

First: Starting from the initiation of the tx from an end point reaching the payment gateway. And back from Payment gateway to the end point (can be browser, POS etc.)

Second: Payment gateway to financial institutions and back

Metrics: Back-end (Banks/Financial institutions/card)

# of Transactions hitting the payment gateway should be equal to # of transactions generated through an end point. This metric will also point to # of Tx lost. Important metric as it also ties to the revenue of the payment gateway. Easy to implement as well - P1
Time in milliseconds for the transaction to reach the gateway. Important metric for Customer experience. CSAT score heavily dependent. All compliant packets already timestamp this - Easy to implement - P1
# of Tx reaching the financial institutions.
Time in milliseconds for reaching the financial institution. Directly tied to timeout of transaction metric
# of timeouts in transaction - P1. Error code specific, easy to implement - P2
# of responses from the financial institution
# of positive auth responses from the financial institution
# of denied transactions (from 6 and 7)
# of fraudulent tagged transactions - P1 - Multiple attribites and self learning - Medium difficulty to implement
Accuracy of fraudulently tagged Tx
# of Tx responses being sent back to POS
Tx amounts. Higher amounts and histograms signal higher trust, reliability. P2
# of protocols (Secure) and formats supported. - P3
# of rollback transactions at back end but front end Tx went through. Headless Tx
Commission/Fee paid to financial institutions per transaction and cumulative - P1
Security formats supported like MFA. # of customer signing up of MFA support. -P3

Metrics: Front end

# of Merchants in the network - P1. Directly tied to revenue. Marketing effort involved and need to support multiple back end integrations
# of Tx generated from the channel. From this payment gateway can calculate its revenues and commissions to be paid to financial institutions - P1 -
Tx amounts. A larger amount goes through a vetting/fraud identification process and hence bigger txn fees
# of credit cards companies supported. At the minimum Visa, Amex etc. This is also a merchant specific decision. Used for calculating the fees to be paid by the payment gateway (can be either a bank of a hub) - P1. Related to acquisition. Robotic but easy to implement - P1
# of Tx hitting the payment gateway after a submit or checkout

I have not mentioned the number of cancelled tx, cc details entered etc. as that can be done aither at the website level or at the payment gateway side.

Summary:

# of transactions - directly tied to my revenue

# of failed transactions - directly tied to customer experience

Chetan Channa · Answer 4 · 2020-06-07T03:48:50+0000

My feedback on this metrics interview question.

Let's first re-iterate what payment gateway is. It is a service/product or tunnel that provides a way to the end consumer to pay a particular merchant or platform. The payment gateway allows users to choose the payment method they prefer to pay and at the same time eases the job of merchants/platform by providing payment as a service (which otherwise they would have to build on their own).

Assumptions

Merchant onboarding process/tools/products are out of scope.
Will cover metrics required to be monitored once the payment gateway is available on the product/merchant.
Detailed Technical metrics are out of scope since they would depend on the tech stack.
Metrics related to integration with payment partners is out of scope.

With the above context, there are 2 end-user segments of the payment gateway:-

End Users
Merchants/Products/Platforms

For the payment gateway to be successful, we have to think about both the user segments.

I would further break these metrics into Business, Product & Technical.

Business Metrics

User Segment	Metric Group	Metric	Comment/Definition
End User	Acquisition	# of users accessing the payment gateway	While this is dependent on the merchant, but this number should keep on growing
End User	Activation	# of users completing the payment
End User	Retention	# of users storing payment/CC info for future use # of users selecting the payment gateway on products having multiple payment gateways	This is slightly tricky as retention numbers would depend on the actual stickiness of the product where the gateway is being used. So we will use some proxies here.
End User	Referral	None	This is not a referral type of service.
End User	Revenue	Total Revenue

User Segment	Metric Group	Metric	Comment/Definition
Merchant	Acquisition	# of Merchants/Products using the payment gateway
Merchant	Activation	# Total number of transactions completed # of transactions completed per merchant
Merchant	Retention	# of merchants renewing the contract/repeat merchants
Merchant	Referral	# of leads received via referral from existing merchants	This is not a referral type of service.
Merchant	Revenue	# Total Revenue Share Earned per Merchant	I am assuming payment gateways take a revenue share of total transactions happening through their platform

Product Metrics

Once the payment gateway is integrated, the user goes (generally) through following steps

Chooses to pay the merchant & initiates payment on merchant site(1) -> Chooses the preferred payment mechanism (bank accnt/CC etc) (2) -> Gets to see the list of available payment gateways(3/optional) -> Chooses a payment gateway(4) -> Payment is initiated (5)-> Performs actions as per the payment option (6)-> Receives confirmation on payment(7)

I would also monitor the above funnel and figure out the drops at various steps of above funnel especially between 3&4 , 5&7.

Technical Metrics

While mentioning all technical metrics is out of scope for this but one key high-level metrics, I would monitor

% of transactions failing due to technical issue

So above is the summary of metrics, I would monitor. If I have to monitor just a few, I would

Total Revenue - Monitoring this would ensure that the business/product is sustainable.
Total number of transactions completed - This would ensure that the product is being liked by users as well as merchants.

productmanager1644 · Answer 5 · 2021-02-09T03:02:46+0000

CLARIFY:
1. B2B v. B2C? You choose. I will focus on B2C.
2. Is there a goal I should keep in mind? You choose.
PAYMENT GATEWAY BACKGROUND: A B2C payment gateway provides a digital "bridge" between a merchant and a customer purchasing an item on web or mobile. They are very popular for eCommerce websites. The gateway sends credit card information from a merchant's website to the credit card network (Visa, Mastercard, AXP or Discover) for processing and returns the transaction details from the network to merchant.
GOAL: I would like to focus on increasing engagement for the payment gateway.
JOURNEY:
1. Customer purchases item online or via mobile with credit card.
2. Payment gateway securely sends credit card information from merchant website or mobile channel to payment processor, which then sends information to credit card network for processing.
3. Once the payment has been processed, payment processor forwards authorization to payment gateway.
4. Payment gateway sends response back to merchant website or mobile device.
METRICS: There are a variety of metrics we can use to measure success of the gateway.
1. Revenue:
  1. Total monthly fees collected by payment gateway (charged to merchants)
  2. Total monthly fees collected from credit card transactions (charged to merchants)
2. Engagement:
  1. Average time to process transaction
  2. # of merchants using payment gateway
  3. # of transactions / month processed by payment gateway
  4. Average # transactions / merchant each month
3. Growth:
  1. # of new customers / month
  2. % increase / decrease of customers / month
  3. % increase / decrease of transactions / month
4. Complaints / Failures:
  1. # of complaints / month from merchants
  2. # of failed payments / month
  3. # of payment reversals / month
  4. # of reported fraudulent payments / month

EVALUATE METRICS: Given the priorization and the focus on engagement, I'd like to focus on the engagement and growth theme metrics with highest priortiziation.

Theme	Metric	Measure of Engagement
Revenue	Total monthly fees collected by payment gateway	Medium
Revenue	Total monthly fees collected from credit card transaction	Medium
Engagement	Average time to process transaction	Low
Engagement	# of merchants using payment gateway	High
Engagement	# of transactions / month processed by payment gateway	High
Engagement	Average # transactions / merchant each month	Medium
Growth	# of new customers / month	High
Growth	% increase / decrease of customers / month	High
Growth	% increase / decrease of transactions / month	High
Complaints / Failures	# of complaints / month from merchants	Low
Complaints / Failures	# of failed payments / month	Low
Complaints / Failures	# of payment reversals / month	Low
Complaints / Failures	# of reported fraudulent payments / month	Low

Himani Singh · Answer 6 · 2020-08-13T02:00:00+0000

Payment gateway is a service provided to the end customers to provide ease of payment to be made to a retailer. They can also choose a mode of payment (debit/credit card). Payment gateway also provides ease of getting the payments from end customers to the retailers, as otherwise they would have to buy and maintain a payment tool of their own.

Goal of the payment gateway are:

1.Ease of payment and choice of mode of payment for end customer

2.Ease of payment for the retailer

3.Revenue generation through transaction fees incurred on retailer for each transaction

Success metrics:

Total number of new users / total number of users – Growth

Number of new merchants / total number of merchants – Growth

Average Revenue Per User (ARPU)generated from the business retailer transactions - Revenue

Average transaction value per retailer – Revenue

Lifetime value of each retailer - Revenue

Number of successful to unsuccessful transactions - Retention

Total number of retailers renewing their contracts with the gateway – retention

The number of customer having saved their payment details and preferred mode of payment in the gateway – Retention

Conversion rate: total number of transactions completed /total number of clicks

So I would prioritize measuring ARPU and Avg transaction value per retailer as these two metrics would help in evaluating the revenue impact, followed by the rest of the metrics – for growth and retention.

aishwarya gupta · Answer 7 · 2020-08-06T18:54:23+0000

A payment gateway is a service which helps merchants perform payment transactions for their customers.

Payment gateways as a product has 2 scenarios

Merchants who send customers transaction requests
Numbers of payment option/ banks supported by PG

Success scenario: A success scenario for a regular PG would come by taking merchants transaction request in a secure manner and then taking it to bank & if successful from issuing bank’s end then informing the merchant of same which in turn informs the customer.

The whole process ideally takes 2 to 3 seconds, so the performance as well as security is an essential part of the process.

The main metrics to be observed as a PG are mentioned below.

S. No	Metrics	Comments

1	Success rate of individual merchants	As a PG onboards merchants, what merchants are looking for is a success rate against the PG they have integrated with.
2	Success rate of individual banks	PG in turn integrated with different banks within the country they operate in so that merchant can provide a wide choices to their customers, so success rate of banks is very imperative here. Like in India ( HDFC, ICICI , SBI & Axis covers more than 70 % of country)
3	Success rate of payment options	There are various payments now days ( CC, DB , Net Banking, UPI as well as Wallets). A good PG should be support as many payment options as possible.
4	Total time taken for a successful transaction to be completed	As merchants are looking for an frictionless experience for their users, performance is important metric here.
5	Failure rates against every bank	Banks encounter unscheduled downtimes every now and then, so its important to check the performance of every bank overall
6	Total volume against every merchant	Merchants who rely on their respective PG's for many payment options, tend to give more traffic and preference to PG which gives high success rate.