In the hyper-speed eCommerce world, payment processing needs to be seamless. When a shopper buys something online, a lot goes on in the background before they actually complete the payment. In the context of payment processing, ‘presentment’ involves recording and processing transactions before the money is exchanged.
Presentment is a key activity in both business operations and customer experience. It enables merchants to receive payment successfully and provides buyers with a good transaction experience. An understanding of how presentment works can help eCommerce businesses optimize payment flows, reduce disputes, and improve cash flow.
What Is Presentment in eCommerce?
Presentment is the stage of the payment process where a transaction is actually presented to a payment processor or financial institution for approval and subsequent settlement. It occurs after the customer places an order but before funds are actually withdrawn from their account.
In a card transaction, presentment is the process of sending transaction information to the card network (Visa, Mastercard, or other issuer), which sends it to the issuing bank. The bank authenticates the request and approves or rejects it based on available funds, fraud detection results, and other risk management parameters.
For all other payment methods like digital wallets and buy now, pay later (BNPL) facilities, presentment remains the same. The system verifies the transaction, making sure that all the details tally with the customer’s credentials and account balance before proceeding.
If there were no presentment, there would be no verifiable and effective method of approval for transfers, payments, chargebacks and partial payments (amongst other transactions).
The Role of Presentment in Payment Settlement
A transaction does not happen instantaneously. There are several things that happen between the time you click “Pay Now” and the merchant gets paid. Presentment is an integral component of the cycle that serves to connect authorization with settlement.
- Transaction Initiation: The customer places an order and payment details are input. An initial check by the system is conducted to verify validity.
- Authorization: The payment processor makes a call to the issuing bank to confirm funds and check for fraud. If approved, the customer’s funds are held.
- Presentment: The transaction is formally presented for processing so that funds can be moved from the buyer’s account to the merchant.
- Settlement: The payment is received by the merchant, settling the transaction lifecycle.
Presentment vs Authorization
Though often confused with each other, presentment and authorization perform different roles. Authorization checks to ensure that there are adequate funds in a payment instrument and if the transaction looks legitimate. Presentment, however, makes the request final, formally executing the transaction.
A customer’s payment may be authorized, yet if presentment fails, no funds will ever be received by the business. This is disruptive in situations where businesses have to account for future payments such as is the case with subscription models or pre-orders.
Why Presentment is Important to eCommerce Businesses
Presentment is not merely a technical payment step but directly affects revenue, cash flow, and customer satisfaction.
1. Quicker and Safer Payments
A timely presentment process guarantees prompt payment to merchants. As presentment follows authorization, it assists in avoiding delays that result in lost sales or open transactions. Smooth presentment lowers the risk of bottlenecks that slow down order fulfillment.
2. Preventing Chargeback and Fraud
Among the leading eCommerce threats are fraudulent transactions and chargebacks. Presentment guarantees payment information is verified prior to fund deduction from the payers account. Confirming transaction authenticity reduces the risk of dispute, lessening both financial loss and reputational damage.
3. Improved Financial Planning
Cash flow is critical for all businesses operating online. Because presentment dictates when payments are settled, it influences how soon businesses have access to money. An orderly sequence enables proper financial forecasting and budgeting.
For companies with large numbers of transactions, it becomes challenging to keep records of payments, refunds, and disputes. Good bookkeeping helps ensure that presentment data is consistent with available financial data so that it is easier to reconcile accounts and monitor revenue. When professional bookkeeping is combined with payment processing automation, companies are able to simplify financial reporting with fewer errors and better financial management overall.
4. Enhanced Customer Experience
A frictionless payment experience leads to a better trust factor for the customer. Presentment allows transactions to go through seamlessly, with fewer delays or unforeseen issues that would annoy customers. When customers get immediate confirmation that their payment is processed correctly, it builds trust in the eCommerce website.
The Effect of Presentment on Returns and Refunds
Refunds and returns are part and parcel of eCommerce, and presentment is an important factor in how they are handled. When a refund is requested by a customer, the initial transaction has to be reversed. Because presentment controls when funds actually change hands between accounts, it has a direct impact on the speed with which refunds are processed.
For credit card payments, refunds typically operate in the reverse direction to the original transaction. The merchant sends a refund request to the payment processor, who submits it to the card network. The issuing bank has to approve the reversal prior to depositing the funds back into the consumer’s account. This can occur within a few hours or take up to a few business days, based on the payment processor and bank.
eCommerce sellers who process refunds quickly have higher customer satisfaction. Presentment delays of refunds can frustrate purchasers and raise the possibility of dispute or chargeback. Companies can enhance refund processing through the use of payment systems that have real-time reversal capability and by providing buyers with information on expected timelines.
Providing transparent return policies and simplifying presentment of refund can minimize friction, making the post-purchase journey smoother. A smoothly executed refund process provides confidence to customers and assists in repeat business.
Presentment Challenges and How to Overcome Them
For all its significance, presentment is not always flawless. Technical glitches, failed payments, and regulatory adherence can be hurdles that can get in the way of transactions. eCommerce businesses need to be cognizant of such pitfalls and act proactively to circumvent payment delay and customer dissatisfaction.
One such problem is failed presentment that is caused by inadequate funds, aged payment instruments, or system issues. Late payments or uncollected revenues are what companies can suffer in such cases. Automatic retries and payment reminders in real-time can effectively resuscitate failed payments.
Cross-border presentment is another issue. International sales typically entail currency exchange, extra processing fees, and differing banking rules. Using payment processors that have multi-currency presentment can minimize conversion problems and make foreign sales easier.
Chargebacks and fraud can also cause a problem for eCommerce businesses. Certain fraudulent transactions pass authorization but are flagged at presentment. AI-driven fraud detection and chargeback prevention tools mitigate these dangers.
By streamlining payment infrastructure, keeping up to date with industry regulations and requirements, and leveraging automation tools, eCommerce companies can ensure presentment is seamless and consistent. Being proactive on these dimensions results in quicker payments, reduced disputes, and an improved customer experience overall.
Optimizing Presentment for eCommerce Success
To maximize efficiency and minimize payment issues, businesses must streamline their presentment processes. Several factors influence how smoothly this process runs, including payment infrastructure, fraud technology, and chargeback management.
1. Utilize Trustworthy Payment Gateways
The choice of the payment gateway directly affects presentment speed and accuracy. Leading providers such as Stripe, PayPal, and Square possess advanced processing features that ensure seamless transaction processing. Selecting a gateway that integrates well with an eCommerce platform ensures secure presentment and settlement.
2. Initiate Automated Payment Processes
Automation reduces human error and increases consistency of payments. The majority of eCommerce businesses utilize automated presentment processes to get transactions submitted for settlement in a timely manner. Recurring billing, auto-capture, and real-time verification are some of the functionalities that ensure continuous financial processes.
3. Adopt Vigorous Fraud Detection Controls
As presentment completes transactions, companies need to ensure legitimacy prior to this point. Fraud detection software, such as machine learning algorithms, address verification systems (AVS), and tokenization, prevent unauthorized transactions. Enhancing security measures reduces chargebacks and financial exposure.
4. Track Transaction Data
Ongoing tracking of payment data reveals inefficiencies in presentment processes today. Key performance indicators such as authorization rates, chargeback incidence, and settlement lag can highlight areas for improvement. Businesses can utilize these to optimize their payment strategies and both win customer trust and build brand loyalty.
The Future of Presentment in eCommerce
With increasingly sophisticated digital payments, presentment will remain a vital part of eCommerce transactions. New technologies, like blockchain-based payments and AI-driven fraud prevention, can further streamline the process.
1. Real-time Payment Processing
Legacy presentation processes are time-consuming, while real-time payments are increasingly prevalent. Emerging solutions, such as central bank digital currencies (CBDCs) and real-time gross settlement (RTGS) systems, may minimize latency between authorization and settlement.
2. Enhanced Data Security
Security issues in e-commerce transactions are still on the rise. Encryption, biometric authentication, and tokenization will evolve and in future will further secure presentment by reducing the risk of fraud – without sacrificing efficiency.
3. AI-Based Risk Analysis
Artificial intelligence is also being utilized more to examine transaction pattern analysis and identify anomalies. AI-driven risk analysis has the potential to enhance presentment precision by identifying suspect transactions prior to their processing.
An Evolution of Transactional Efficiency
Presentment is an important part of eCommerce payment processing that helps get the transactions settled efficiently and securely. Making this process more efficient helps businesses improve cash flow, decrease chargebacks, and provide an improved customer experience.
As electronic payments keep developing, the role of presentment will grow, embracing new technologies that promote transactional efficiency. Those eCommerce companies with a vision for best-in-class presentment strategies will be best positioned for financial health and long-term prosperity.
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