The Secret AI Hack To Recover Failed Payments Forever — Matīss Maliks | Why Not Rely On Stripe & Shopify For Payment Processing, The Hidden Revenue Risks, Why Standard Gateways Fail, How AI Recovers Revenue, Why Global Sales Drop Approvals Rates (#488)

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00:00:00:02 - 00:00:22:08
Unknown
They have all the rights to freeze your funds, which means that your cash flow can stop at any moment. Never rely on one a quieter or one solution for payment processing, because ultimately that can be your biggest pain point. What are the biggest warning signs that a brand has when they have a payment problem? Yes, absolutely. So.

00:00:22:10 - 00:00:42:20
Unknown
Hello. Welcome to another episode of the E-commerce Coffee Break podcast. Most e-commerce brands spend a lot of time optimizing their ads, email marketing, conversion rates, and customer acquisition. But what happens after a customer clicks by? Now here's the thing. Some customers are ready to purchase, yet their payment gets declined and many merchants don't even realize that's happening now.

00:00:42:21 - 00:01:03:01
Unknown
Shopify Payments and Stripe have made it incredibly easy to start selling online, but as the business grows, hidden revenue leaks can appear and we want to find out how that works. Most of this happens behind the scenes. Many merchants never realize how much money they are leaving on the table. We want to dive into this and to help to unpack this, I'm joined by Matīss Maliks.

00:01:03:03 - 00:01:23:17
Unknown
He is the head of Sales and Growth at LTVX.ai, and helps e-commerce brands recover revenue from failed payments and improve their payment approval rates, but is welcome to the show. Thank you. My pleasure. Let's dive into it. Most e-commerce brands start with Stripe or Shopify Payments. At what point does that set up actually start holding a business back?

00:01:23:20 - 00:01:54:22
Unknown
Yes. So Shopify and Stripe themselves are very fantastic products. It reduces like a lot of friction actually, for newcomers to come and start processing payments instead of weeks or months, but it allows them to do it in hours. So if to answer your question, where does the challenge really rely on exist is when a merchant is starting to grow and obviously process a lot of money, even a small percentage, even 10% of decline payments can crawl up to huge six figures.

00:01:54:22 - 00:02:20:21
Unknown
And ultimately, if you're not recovering at least a portion of those, it's ultimately written off as lost revenue. And especially teams who are just starting out, they don't have, in terms of operations ahead of revenue or chief revenue officer. So they're sort of focusing all their attention on media, focusing all their efforts to scale, but they rarely take a look at the back end and understand, how can we make more money from existing traffic.

00:02:20:22 - 00:02:43:02
Unknown
Right. And that's where we come in and ultimately help you recover declined payments that your setup ultimately could not recover or process. You want to dive into these declines and what they are. So one word that our listeners probably have heard about is false declines. Can you explain what false declines are and how that impacts the sales? Yeah, absolutely.

00:02:43:02 - 00:03:06:10
Unknown
So false declines are also widely known as soft declines. And ultimately there can be a lot of reasons. But mostly what people say is do not honor. So for example, a customer is making a cross-border purchase or let's say it's the first time purchase with you specifically, and it's a new merchant of record for them, or even the amount can look suspicious, right?

00:03:06:11 - 00:03:30:16
Unknown
So ultimately Bank is giving you the not not enough information. They're just saying do not honor. But what falls behind that is actually a lot more in depth, right? And this is where we can sort of leverage our AI and ultimately see what was the reason behind this soft decline. And if it is do not honor then our also system recognizes, okay, what kind of card is it.

00:03:30:17 - 00:03:53:10
Unknown
What kind of geolocation is it where you try to attempt a payment. And we ultimately connect the dots better than your current payment setup can. And through our payment infrastructure, we're able to resurrect that payment. I remember my times as a seller. This Do Not honor came up from time to time, and I didn't absolutely have no idea what it means, so that was a good explanation from your side.

00:03:53:11 - 00:04:18:00
Unknown
So how common are false declines are actually for e-commerce brands today. So for e-commerce we're seeing one of the biggest KPIs when it comes to decline transactions and specifically soft declines. It varies of course per brand depending on what you sell, where are you selling it to, and what kind of customers are you going after? Right. But typically it varies from five to even up to 30%.

00:04:18:01 - 00:04:45:23
Unknown
As you can imagine, those higher I would say higher 20% come definitely from younger audience who might not have enough money on the cards or who whose cards are very fresh and stuff. So it's it really depends per merchant and on scale as well. But on average, we're seeing in between those 15% that we're able to also later on work with now I was selling internationally and this honor came up from time to time.

00:04:46:00 - 00:05:16:08
Unknown
How does it selling internationally affect payment approval rates? Yes. Very good question. So it varies a lot because there are very specific banks that operate in specifically in very few regions. For example, Latin American countries are more known, but let's say CIS countries such as Armenian stuff is one of the great examples where even we have worked with, for example, iGaming advertisers and therefore facing very low amounts of approval rates.

00:05:16:09 - 00:05:38:10
Unknown
And it's just really hard for them to process these cards, because ultimately, there are a lot of banks that just don't want to take these transactions, right. So it's it's it's it's the sort of thing unless you are familiar with then you will just assume, okay, if my product is great, then there's no reason for the checkout conversion rate to be that low, right?

00:05:38:11 - 00:06:01:15
Unknown
But ultimately, when you see people failing out to check out your product or let's say, make a successful deposit, it ultimately becomes a huge pain if you can only approve 15 to 20%. And it's very frustrating for you as well because you're thinking, I'm doing everything right, I'm acquiring these customers at a at the best cost that I possibly can, pouring huge amounts of times on creatives.

00:06:01:15 - 00:06:24:21
Unknown
And just for that, for only every one out of ten users just to be processed. Right. Though intent is within all these ten users. This is a shocking numbers. I mean, if you have a business and most of the people are willing to pay and then I can't get through, obviously that's a huge issue there. Now, what are the biggest warning signs that a brand has when they have a payment problem?

00:06:24:23 - 00:07:01:00
Unknown
Yes, absolutely. So you're going to see approval rate starting to decline. You're going to see specifically the checkout page conversion rate starts falling down and slowly step by step returning. Even if we're talking about subscription businesses returning, customers are going to fail to build. And while you're just going to defy it, as customer acquisition costs rising and Roas becoming harder to maintain, it's something that you can actually work on and fix on because in most cases, how it works with advertisers is that they increase ad spend by 30%, let's say.

00:07:01:01 - 00:07:28:17
Unknown
And so so the traffic also increases by approximately 30%. The add to cart also stays moderately the same. But the revenue increases let's say only by 10%. Then you clearly have a good idea where is the problem, which is the back end which is your payment infrastructure. Now when it comes to recovery, obviously you can reach out to the customer and try to solve the problem, which is a lengthy and very elaborate process.

00:07:28:19 - 00:07:53:02
Unknown
Why can't Stripe and Shopify recover these payments by themselves? Yeah, so they're mainly optimized to process billions of payments across millions of merchants every day, but they're not focused, and their tech is not focused for you to get best possible approval rates for every single payment out there, right. While for us, that's the core goal, for us it's to connect the dots where the payment already happened.

00:07:53:02 - 00:08:15:00
Unknown
And how can we basically give your card the second chance so we can process it? Because if you don't pay enough attention to your declines or you're simply not doing enough retries, that that is the core problem, right? Okay. I want to dive a little bit into what LTV AI does. Obviously you're helping with recovering these payments. How does that work in real life?

00:08:15:01 - 00:08:39:22
Unknown
Yeah, I would say to answer this question it would be best to give you an example. So we recently started working with a neutral merchant. And they were also doing subscriptions and also initial payments of course. And the Alves there are typically on the higher end as well. And the merchant was processing roughly around $2 million per month and was experiencing significant amount of decline transactions.

00:08:40:00 - 00:09:03:06
Unknown
And ultimately those were, like I described before, written off as lost revenue because they have, I think, more than ten media buyers at this point, a CEO who kind of manages all the operations and the finance, who basically gets all the invoices up and running. Right, but they don't have a person in place that goes through the backend, understands why the conversion rate ultimately is very low.

00:09:03:06 - 00:09:28:17
Unknown
So the merchant didn't buy any more traffic. They simply remained there ad spent the same. They didn't need any redesign redesigning in terms of like the checkout page. They didn't, as I mentioned, increased ad spend. They simply recovered the revenue that was already attempting to come through their payment infrastructure, but was declined. And we're not asking merchants to ultimately find more customers.

00:09:28:18 - 00:09:53:08
Unknown
We're showing them away how the same customers can bring them more money by simply approving more customers out of what they have already. And I would say this is the best way I can answer your question. Very good answer. Now one thing comes to mind. If you have a lot of declines, are you in the risk of losing your payment gateway, your account with Stripe or Shopify payments?

00:09:53:10 - 00:10:12:21
Unknown
Of course. So the risk is always there. If we're talking from a merchant's perspective, then yes, if you're not abiding some policies that are written by Stripe or Shopify themselves, or let's say you are hitting bigger chargeback rate this month, they have all the rights to freeze your funds, which means that your cash flow can stop at any moment.

00:10:12:21 - 00:10:35:07
Unknown
So this is also why we advise to never to never rely on a one acquirer or one solution for payment processing, because ultimately that can be your biggest pain point, and you're giving it so much trust that everything is going to be okay. But day to day I see hundreds of cases, especially on being written up on Twitter where they are complaining about that.

00:10:35:07 - 00:10:53:00
Unknown
Their account got frozen and they're screaming out for help, and they're thinking, my business is going to get shut down. And you still have, for example, advertisements online. And of course, if you're good with it, you're going to stop the ads, but ultimately you're just bleeding money at that point. If you don't have a plan B or plan C, right.

00:10:53:00 - 00:11:12:14
Unknown
And that's that's why we always advise to have more of those gateways set up, more of the acquirers in line, and more of the logics always in place. No, I think everyone who is in business and e-commerce business for quite some time should be aware of the system or of the risk. Losing your payment gateway and then having a backup is great.

00:11:12:14 - 00:11:47:00
Unknown
And obviously with LTV you can recover all these payments that wouldn't go through otherwise. So for our listeners that are listening right now, what numbers should they check first? So the number they should definitely pay attention to what sort of approval rates they're getting on initial payments and what would be the checkout page conversion rate. Because ultimately, if those two are low, you're just bleeding money and it's something that you can pay more attention to and make sure that you're focusing not only on the front end, which may be the creatives or acquiring traffic, but also on the back end.

00:11:47:00 - 00:12:03:15
Unknown
And in case that you are looking for better processors or SPS or ISOs, doesn't matter. We are very greatly connected. So you can always reach out to us and we'll be able to help you on the front end first, and then we're going to see what the decline rates are going to be, and then we can help you.

00:12:03:15 - 00:12:41:11
Unknown
Also on that side, you mentioned before that different businesses see different recovery rates. Can you share some numbers on industries on verticals where you see the most risk? Yeah. So the high risk merchants are the ones where we're seeing more risk and sort of say lesser results, because also the intent is sometimes confusing within the customer. Does he really want to sign up for the services or not though on the other hand, for example, we've been working with more of the SaaS companies and apps where the intent is truly there and it's white hat business that they're running.

00:12:41:11 - 00:13:04:00
Unknown
It's nothing high risk, and that's where we're going to see closer to that 25, even 30%. While the other ones that I mentioned is going to be maybe even 5 or 10 or in rare cases, even less than that. Right? Okay. Now, I mean, obviously every purchase that you can recover is extra money in the bank. And if it's 5%, that's 5% more than you wouldn't have otherwise.

00:13:04:00 - 00:13:31:14
Unknown
Now talk about your let's talk about your perfect customer. Which customer is the best fit for your business? Yes, absolutely. So we do work with any person that receives traffic that translates into a credit card transaction. So especially for subscription brands where your customers lifetime value is very dependent on multiple amounts of payment cycles and attempt, this is where we're going to significantly increase the results.

00:13:31:14 - 00:13:54:11
Unknown
Because ultimately, if your lifetime value is higher, then those customers are going to also bring a lot more revenue if we're going to be able to resurrect those payments. Correct. And in this case, I would say, yeah, we work with broad, very broad audience. It may be apps, it may be fintech companies, it may be anti-virus campaigns, it may be even e-commerce merchants.

00:13:54:11 - 00:14:14:05
Unknown
So we are very diversified on our focus. And like I said in the beginning, if you're processing credit card transactions and you're seeing low approval rates and you you think that there is something wrong in your back end, but you're mainly a front end sort of guy focusing on creatives, reach out to us. There's definitely worst case scenario.

00:14:14:05 - 00:14:34:17
Unknown
We can give you good advisory on how can we help you with that? And even if we might not work together directly, I'm sure that you will find also chatting with me or also the founder himself directly. Very insightful. Yeah, I think that's definitely a good offer to have a check from an expert to see if there's any kind of revenue leaks that you have there.

00:14:34:18 - 00:14:58:03
Unknown
Now walk me through a typical onboarding process of a new user. What steps are involved? How long does it take to get up and running? Very good question. Yes. So we basically start with making you an account on our platform. Once that's done we jump to compliance. So compliance typically takes seven working days because we do have to do our pre-wedding with our own banks.

00:14:58:05 - 00:15:18:02
Unknown
Just to understand if the banks are going to want to process this and if they're going to take this, because we're also not going to take very aggressive stuff, as these are very large merchant accounts, and we have more than $10 billion in cap. So once that's done and seven days go by, we are going to move on with API integration on your checkout.

00:15:18:03 - 00:15:40:00
Unknown
We have more than 20 developers in-house that are at disposal and ready to go to help you with that. If you are, let's say, sort of struggling on the coding side, but if there's no issue with the API integration, we can do a simple post back, check if everything works, and then I would say within two weeks you would be up and running and already salvaging declines.

00:15:40:01 - 00:16:16:18
Unknown
Now, obviously there's a lot of legal stuff involved when you're talking to us. There's a lot of paperwork. There is a paperwork, of course, because we want everyone to be safe and protected and including NDA, including our merchant agreements. There's a lot of information that you need to go through and sign, and ultimately for us to consider. Also, you as a serious player that doesn't want to jump this and is ready to also give attention to legal because that's at the end of the day, very important as well as also customers are going to see our joint descriptors on their credit cards.

00:16:16:19 - 00:16:53:08
Unknown
Right. So it makes perfect sense. Now, is there any kind of homework that a merchant needs to do before they can get started? I wouldn't say that they need to do any sort of homework if they are focusing on also on their back end lately and they're noticing something's off, or they simply want to find a way how to increase these payments in terms of approval rates, then just simply come to us, talk to us, and we'll we'll show you where the leaks and ultimately be able to help you, though if you have done some auditing before and you know the exact reasons, for example, for the past 100,000, let's say, transactions that you have

00:16:53:08 - 00:17:14:15
Unknown
had, what is exactly the issue that would of course be insightful, but it's not a necessity to basically have. Okay, cool. Now obviously you want to make money as well. How does your pricing structure work? So we typically take 5% and send back everything, which is the rest 95% of the merchant. This is our platform fee. It's all together.

00:17:14:15 - 00:17:33:14
Unknown
There is no monthly cost. There's no setup costs. We only take 5% successfully from everything. We get back to you. Okay, that's a fair because that's you just recovering money that you otherwise wouldn't have. So that's a good deal. But is before our coffee break comes in. And is there anything you want to share with our listeners that we haven't covered yet?

00:17:33:15 - 00:18:01:02
Unknown
If you're heavily focusing on the front end and making creatives and making sure that you have a very strong row as a zoo scale, if not now, then later on, definitely make sure to message to us find a way of resurrecting these declines because it's I cannot express this enough, but this is one of the sole reasons why some of the businesses fail because of very poor payment infrastructure.

00:18:01:02 - 00:18:22:00
Unknown
And as I always say, worst case scenario, you'll get to speak with people who have been doing this for more than 15 years and have been in and out of the payments all the time. And worst case scenario, you're going to learn something new. Maybe we're not going to work that, actually. But I'm very confident that once you turn on our solution, there is no going back.

00:18:22:03 - 00:18:47:06
Unknown
Absolutely no. I wish I would have had someone back in a time when I was actively selling explaining this to me, because more then often I was sitting there and was like, why was this payment declined? And there was literally no answer to it. Where can people go and find out more about you guys? Yes. So leave my if you want to go on our website and simply fill out the form of your contact details, we'll get in touch with you within a couple of hours, if not minutes.

00:18:47:06 - 00:19:16:06
Unknown
I'm typically online all the time. That would be the sole, I would say CTA for us to just visit our website, fill out the contact form, and me or someone else is going to get in touch with you to figure out how can we work together. Okay, I will put the links in the show notes as always. Then you just want to click away and I hope that a lot of listeners will reach out to you and get their payment processing optimized, and hopefully end up with less disapproved payments and increase their revenue.

00:19:16:08 - 00:19:19:11
Unknown
Thanks so much for your time today. Thank you as well. See you.