Payments are so ubiquitous that we often forget that each one is a unique combination of data points that are catapulted across providers, players, systems and ecosystems with one outcome in mind—to be approved. But behind the simplicity of this equation are millions of optimizations that need to take place to ensure success. When optimized correctly a payment creates, captures and compounds in value. When done wrong it’s not just a lost payment, it’s lost revenue and lost customers for your business. Checkout.com has partnered with Oxford Economics to actively track and measure the cost and losses of payment performance since 2019.
In 2022 as much as $50.7 billion in lost revenue occurred due to false declines and that number is growing. Worse yet, the contributing factors for those declines were often variables beyond a merchant’s sphere of influence and sat firmly with issuers, schemes and their payment providers.
So as a business that likes revenue how do you combat the false decline problem if you don’t have the control, data or influence to inspire change? How do you determine how big this performance problem is for your business? The first step is unboxing payments.
The payment sphere involves many players like issuers, schemes and payment service providers. Each with a unique set of frameworks, rules, preferences and technologies they utilize to impart and impact on your payment as it gets processed. It’s in these details and nuances where performance is affected and contributes to the $50.7 billion dollar problem.
For example, the application of SCA exemptions. There are different routes like authentication or direct-to-authentication that exist, different exemption types that can be applied to the same transaction like Transaction Risk Assessment (TRA) or Low Value Transaction—and each player in the payment chain, like the 10,000 different issuers, have a preference for one route or exemption type over another, but the only way they tell you is by an approve or decline response code.
Adding to the complexity of these preferences and technologies is that nothing in payments stands still. New payment instruments like Network Tokens and the evolution of frameworks like 3D Secure 2.3.1, are adopted at varying pace depending on regionality, mandated dates for implementation and the capacity of each player's roadmaps to build the prescribed solutions into their tech stack. Beyond this are the legacy systems often patched together that have unknown bugs, complex data mapping and layers of inefficiencies. Every payment in the world must go through these layers and players—its survival of the fittest.
By now you may need a breather and are quite justified in asking “how do any of my payments get approved in this complex, fast and inconsistent environment?”. The truth is that modern PSP’s utilize the likes of AI to circumnavigate this environment but too often don’t provide visibility to their customers of what optimizations are and aren’t working (including how declines are triaged).
Here at Checkout.com we want to fight the false decline problem head on using modern technology, which is why we’ve designed our latest payment optimization product—Intelligent Acceptance. With Intelligent Acceptance a merchant can prescribe what their business goal is, be it for cost, conversion or compliance and have their payment performance geared towards that goal; a global first. The solution utilizes a combination of our advanced AI, global network of payment data and deep expertise to give merchants something they’ve been craving - more visibility and control over payment performance.
In a nutshell, Intelligent Acceptance takes global acquiring, issuing, payment processing, authentication and Network Token data (to name a few) and runs it through a range of algorithms that analyze and select in real-time the best optimizations for any one transaction. Further bolstering this is our payment experts and data-scientists who actively work with issuers and schemes to unlock inefficiencies, debug inter-connected systems across players and seek council on new payment mandates.
Let’s look at three examples of optimizations that Intelligent Acceptance has unlocked for Checkout.com merchants, and the results it’s delivering for businesses to date.
Problem: Network Tokens can enable processing costs efficiencies due to interchange cost differences. However, the adoption by issuers of Network Tokens is varied and means if you send payments only via Network Tokens some issuers may not recognise them.
Solution: Through our global network of data and continual experimentation, Intelligent Acceptance was able to unlock if an issuer supported Network Tokens and the predicted uplift vs sending a transaction with a PAN. Simply put, it unlocked where to use a Network Token and when to use a PAN for performance and cost benefits.
Result: We reduced a retailers interchange fees by $103,000 over just a couple of months, through the intelligent application of Network Tokens. Better still, the retailer was able to leverage Network Tokens through Intelligent Acceptance without having to write a single line of code.
Problem: Despite optimal flows, payments can still get declined due to set-up preferences or errors. In this example, a European merchant was sending non-3DS traffic in EEA. The result was that issuers were soft-declining their traffic.
Solution: Deep data and expertise is what won in this scenario. Intelligent Acceptance automatically applied the best SCA exemptions and enriched each transaction with the right SCA data before it reached the issuer.
Result: 100% of their soft declines were recovered for this merchant without them needing to reintegrate any systems or write even a line of code. Likewise, all transaction traffic sent to issuers was now 100% compliant.
Problem: Incremental gains and continuous experimentation is crucial to increase acceptance rates. In this example, we noticed that certain transactions for certain industries weren’t performing as well as we would expect.
Solution: Intelligent Acceptance applied a combination of optimizations to generate uplift. This ranged from Network Token utilization, to routing, retry strategies and messaging modification. In this example, it was about dropping data not adding, which contradicts what we as payment experts are led to believe.
Result: This resulted in a merchant achieving a 5% uplift in acceptance rates, which when you think of global enterprise businesses, this results in huge revenue gains.
Technology has rapidly shifted in the digital age and building the right foundations will let merchants take advantage of the immense opportunity that is available. At Checkout.com, we talk about being at Chapter Zero and we’re driven by continuing to push the bar in our industry to increase performance for our merchants. Intelligent Acceptance is one way for us - to learn, adapt and optimize to the highest level so that every single transaction is maximized for success.
Here’s what our partners at Reach, a money transfer provider, have to say about the value of Intelligent Acceptance to their business:
“Since going live with Intelligent Acceptance, our acceptance has increased by over 9.5%. In a game where small improvements drive big impact, this performance improvement is colossal for our business and, crucially, for our client's bottom line.”
Melissa Pottenger, Vice President, Payment Operations at Reach
And here are the topline results for Intelligent Acceptance so far:
Increase conversions and unlock untapped revenue from your payments.
Intelligent Acceptance enables merchants to get more revenue from their payments without having to lift a finger. Plus, it works out-of-the-box with no development work required on the merchant’s side.