What are authorization rates?
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, sometimes called an authorization rate. 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.
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 a payment acceptance rate important?
Your payment acceptance rate is important because it measures the success of your business’s payment processing capabilities.
If your payment acceptance rate is low, you’re losing valuable revenue and most likely upsetting your customers, who may decide not to reattempt the transaction or to buy from you again. If your rate is high, you're maximizing both revenue yields and customer satisfaction.
But beyond these blunt facts, measuring your payment acceptance rate gives you the perfect jumping-off point for understanding which transactions are being declined and why, so you can develop a strategy, if necessary, to continually improve and refine your payment experience.
Segmenting your payment acceptance is the best way to derive maximum value from your data. For example, how is acceptance affected by the payment method used, the location of the customer, or the type of transaction (e.g. subscriptions vs one-offs)? Armed with these insights, you can determine the causes of declines and take targeted action to prevent them from happening in the future.
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 80%, there are steps you can and should take to get it back up to a healthy level. You’ll never reach 100%, but even incremental improvements can have a big impact on revenue. Here’s how to improve 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 the location and age of the customer and even the size of the transaction. For example, younger customers might prefer to use installment options like buy now, pay later (BNPL) for big-ticket items, while customers in the US might prefer to use a digital wallet like Apple Pay. In some cases, these preferences can be highly localized: Alipay is the most popular method in China. An elevated approach is to know what payment methods customers in a particular market prefer and tailor the order of preference on the payment page accordingly.
Know your customers
With the above in mind, it’s worth spending some getting to know your customer’s 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.
Use 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 know exactly where 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 where legitimate payments are not being accepted because they’re suspected to be fraud, you need to make improvements to your fraud detection capabilities. Many fraud solutions rely on a mixture of machine learning and rules determined by you to make decisions on what to do with suspicious transactions. You should customize your solution to ensure low-risk transactions are accepted without issue while higher-risk transactions are routed for further authentication.
Increase your acceptance rate with Checkout.com
With Checkout.com, it’s easy to optimize your entire payment experience, boost your acceptance rate, and maximize revenue thanks to our suite of payment tools.
With supercharged fraud-fighting capabilities, actionable and highly-accessible payment data, and countless local payment methods, merchants have all the tools they need in one unified solution.
Speak to our team to find out more about how you can use Checkout.com to increase your acceptance rate.
SHARE THIS POST
Most recent articles
Return to Home
September 12, 2023
Merchant Category Codes (MCC): what are they and why they’re important
September 12, 2023
Save now, buy later: what it is, how it works, and how it benefits merchants