What is payment acceptance rate and why does it matter?

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March 26, 2024
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What is payment acceptance rate and why does it matter?

Your payment acceptance rate measures the proportion of transactions attempted by your customers that are successful.

Every business should place its payment acceptance rate at the heart of how they track and understand success, as it’s one of the best insights you have into the effectiveness of your payment process and whether or not improvements need to be made.

Best of all, your payment acceptance rate is relatively easy to measure and utilize. But what factors influence it? And how can you improve it if you discover that you’re experiencing a high rate of declines?

In this article, you’ll discover why payment acceptance rate matters and how you can use Checkout.com to help you improve it.  

Payment acceptance rate explained

Your payment acceptance rate is simply the percentage of transactions that are successful out of all payment attempts. It’s a vital metric for businesses to track, giving you actionable insights into performance that you can use to optimize your operations and maximize your revenue.  

It should not be confused with the authorization rate, which is the measure of how many transaction attempts were deemed legitimate by the issuer.

Calculating your payment acceptance rate is easy. Simply take the number of successful payments, divide it by the number of attempted payments, and multiply that figure by 100. You should be able to pull all the relevant data from your payment system.

Expressed as a formula, your payment acceptance rate looks like this: (successful transactions / total transactions) x 100%

For example, if 412 of 500 payment attempts were successful, your payment acceptance rate would be 82.4%.

A good payment acceptance rate benchmark is around 80% or higher, so the above example would be considered healthy. If your rate is consistently lower than 80%, you need to think about what factors might be impacting acceptance so you can take steps to improve it.  

Why is payment acceptance rate important?

Your payment acceptance rate is important because it measures the success of your payment processing. If the technology isn't working as it should, you're losing revenue – and turning off customers.

Why? An eyebrow-raising 45% of consumers told us they won't try a payment again after a false decline. It's just too time-consuming to re-attempt a failed payment, and trust has already been lost. Most of the time, consumers in this scenario will go straight to a competitor to make their purchase.

If your rate is high, there's a good chance you're maximizing revenue yields and customer satisfaction. To help you reduce the proportion of false declines – and keep funds reliably flowing into your business – Checkout.com introduced Intelligent Acceptance. This is a machine learning tool that our in-house payment analysts use to maximize business revenues without compromising on fraud security.

What can influence payment acceptance rates?

Many factors influence your payment acceptance rate, some within and some outside of your control. Understanding them is the first step towards solving any issues.

Some common factors that affect payment acceptance are:

  • Lack of funds - one of the most common reasons for a payment not being accepted is simply that the customer doesn’t have enough money in their bank account.
  • Incorrect details - when the customer enters the wrong PIN (if present) or CVV number (if making an online transaction), the payment will be declined.
  • Technical issues - anyone involved in the transaction flow, from the payment provider to the acquirer, could experience a technical glitch that derails the acceptance of the payment. For example, a sudden internet outage or even scheduled downtime for maintenance.
  • Risk assessment fail - many transactions now require the customer to complete 3D Secure or another two-step authentication method (such as supplying biometric data) before they can be approved. If the customer fails any of these authentication steps, by, for example, not matching the correct cardholder data, the transaction will be blocked to prevent attempted fraud. Sometimes your fraud-detecting system can be overzealous and block legitimate transactions, known as a false decline.
  • Issuer block - an issuer may also decide to block a transaction if it is considered suitably high-risk or suspicious. For example, if the merchant involved in the transaction is involved in a high-risk industry like gambling or is based in a country with a reputation for fraud.
  • Poor checkout design - if your checkout page isn’t intuitive or lacks desirable payment methods, you might be making it more challenging than necessary for your customer to complete the purchase successfully.

How to improve your payment experience

If your payment acceptance rate slips below where it needs to be, there are steps you can take to get it back up to a healthy level. You’ll never reach 100% (after all, you want to keep fraudulent payments off your books) but even incremental improvements can have a big impact on revenue. Here’s our advice for improving your payment experience:  

Offer alternative payment methods

The more payment methods you can offer to your customers, the better. It’s not uncommon for customers to abandon their purchase if their preferred method isn’t an option. The most favorable options can vary depending on customer demographics and total order values. For example, younger customers might prefer to use credit options like buy now, pay later (BNPL) for big-ticket items. Payment preferences can be highly location-specific, too. For instance, digital wallets are the most popular ecommerce payment method in the Asia-Pacific region, whereas North Americans still prefer to use cards.

Tailor checkout to customer preferences

With the above in mind, it’s worth spending some getting to know your customers' payment preferences. That way, you can tailor your checkout experience to reduce friction and maximize the chances of a successful payment. As well as ensuring you offer their preferred payment methods, think about what information you actually need to collect from your customers to approve a transaction and eliminate any unnecessary fields. You should also provide a variety of shipping options and methods to suit different needs. Finally, ensure your checkout looks secure and trustworthy by making it consistent with your branding and website design.

Utilize payment data insights

Having a wealth of payment data at your fingertips enables you to understand exactly why payments are failing and to measure the success of any improvements you make. You should ask your payment service provider to find the relevant data and how to use it so you can act quickly when you notice any issues.

Improve your fraud detection

If you’re experiencing a high rate of false declines, you may need to make improvements to your fraud monitoring systems. Over-zealous fraud detection engines can impair your revenue by erroneously blocking legitimate payment attempts. Many fraud solutions rely on a mixture of machine learning and custom rules to make decisions about suspicious transactions. You should regularly analyze your decision-making engine to ensure low-risk transactions are accepted while higher-risk transactions are accurately identified.

Choose a strong PSP

If your payment services provider (PSP) only offers payment processing – rather than acquiring and issuing in addition, as Checkout.com does – there is a hard limit on the types of data they can provide. So you could end up without the data you need to correctly analyze your acceptance rates. Few roadblocks stymy revenue uplift more than a paucity of data. Take care to select a PSP that can provide the best data, tools, and on-hand support to set your acceptance rates on the right trajectory.

Read more: Why acceptance rates matter to your business

Increase your acceptance rate with Checkout.com

At Checkout.com, we're experts at helping you to win the revenue your business deserves. Although the performance of payment technology is easily overlooked, it's critical to maximizing customer satisfaction and retaining buyers.

Payment processing is fraught with complexity – differing issuer preferences, local card scheme requirements, and global regulatory changes are just a few of the axes of change. That's why a competitive business needs sophisticated payment technology plus best-in-class expertise to ensure their transactions succeed.

Our machine learning engine Intelligent Acceptance is improving merchant acceptance rates every day, with vendors seeing revenue uplift as a result.

ready for higher acceptance rates and lower transaction fees? Learn more

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March 26, 2024 9:50
March 26, 2024 11:23