When Neil Armstrong landed on the moon he had only 15 seconds of fuel left. Just a little less and he’d never have been able to return to earth. Sometimes the smallest increments can make a world of difference.
The same is true when it comes to processing payments. The tiniest tweak to how data is formatted, utilized and routed can make an outsized difference in how much money you’re taking compared to what you’re leaving on the table. For example adding data points such as customer billing address, phone number and IP to the field on the back end can be the difference between a legitimate payment making its way to your bank account versus it being turned away for no good reason. Small tweaks like this means the transaction will achieve a much better risk score, significantly improving the chances of it passing authentication and authorization.
That’s a matter for your payment service provider, but as a business leader, it's important you know about it. Because it all helps to ensure you’re optimizing your payments performance to drive up revenue.
And these tiny but explosive increments can be measured. Your payments acceptance rate is a measure of how many initiated payments were authorized successfully and an uplift of just a few percentage points is the difference of many millions of dollars for enterprise merchants.
To understand how to improve your acceptance rate you first need to know the complexity of processing a payment. The payment sphere involves many players like issuer banks, card schemes, and payment service providers. Each has a unique set of frameworks, rules, preferences, and technologies impacting your payments as they are processed. It’s in these complex details that payments can fail and your acceptance rate is negatively impacted. The amount of money being lost by businesses to their competitors following a single false decline has grown by 300% in the US since 2019 - reflecting the impact of growing complexity in the payments landscape.
If you’ve ever had a transaction fail because of a small formatting error, you can understand how frustrating it can be for a customer. Missed a space in your zip code? Used lowercase rather than sentence case? Mixed up day and month in a date field? To further complicate the process, each issuing bank will have its own formatting and datapoint preferences, making it all the more confusing for your customer to figure out what error led to the failed payment. But your customer should not have to bear the brunt of complicated issuer requirements. With adaptable messaging, an intelligent PSP can automatically reformat all payment fields to meet the specific issuer’s preferences. This significantly increases the chances of a successful transaction. Multiply that by hundreds of thousands of transactions and you can see how this highly avoidable acceptance rate problem compounds.
So knowing there is a complex ecosystem against you, how do you keep an eye on your acceptance rate and ensure it’s delivering value? The truth is that most PSPs provide you with visibility of AR. But be warned: not all PSPs use the same calculation - adding yet another layer of complexity.
The first step to optimizing payments performance is to analyze your acceptance rate. Look at all the error codes and understand how many payments you are losing and what’s causing your false declines. Yet when it comes to measuring acceptance unfortunately, there's no industry standard and lots of variables often get omitted by payments partners before they reach your payments team. That's a problem because it can mask a plethora of problems and deprive you of valuable intelligence to drive optimization strategies.
For example, when you have full and transparent access to your complete acceptance rate you will be able to identify spikes in fraud that need addressing. You can also catch problems with certain issuers who are applying the wrong risk profile to your transactions. Or you can spot patterns that will inform an effective retry strategy for recurring payments.
Monitoring acceptance rates on the dashboard also helps our merchants see how their payments are performing in different countries and lines of business. Crucially it's a way that businesses can compare their performance with their industry benchmark. And - assuming all acceptance rates were calculated equally - it would empower businesses to direct volume to their highest-performing partner. Without this you may be working with a suboptimal partner, continuing to lose revenue that should have been yours, and continuing to squander away hard-earned customer loyalty.
Here at Checkout.com, we want to fight the false decline problem head-on using modern technology. That is why we’ve designed our latest AI payment optimization product—Intelligent Acceptance. With Intelligent Acceptance a merchant can prescribe what their business goal is, be it cost-reduction, 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 are our payment experts and data scientists who actively work with issuers and schemes to unlock inefficiencies, debug inter-connected systems across players and seek counsel on new payment mandates.
Within only a matter of months, Intelligent Acceptance has already defended more than $1.5 billion of additional revenue for our merchants. Working with customers such as TikTok, The Financial Times, Farfetch, and Deliveroo, we’ve increased acceptance rates by up to 9.5%. That's because it takes the power of sophisticated Artificial Intelligence - trained on more than 20 billion global network data points - to respond optimally, at pace, to the complexity of payments today and tomorrow.
By understanding that acceptance rate effectiveness is both a business-wide and business-specific matter, organizations are equipped to meet or outperform their industry benchmarks. Collaborating with the right technology partner, such as Checkout.com, ensures customized solutions tailored to your unique business requirements. Stay tuned for our upcoming blog series where we will dive deeper into everything you need to know about driving up your revenue performance through better acceptance rates. Should you have any queries or require further information, feel free to get in touch with us today. Your journey toward enhanced business metrics and success begins with strategic decisions and the right partnerships.