4 Ways to drive higher approval rates in online payments

With nearly four times as many declines for online payment authorisations than card-present authorisations (15% and 4%*, respectively), e-commerce merchants face a challenge their in-store counterparts do not – high false decline rates. Declined authorisations don't just contribute to the lower conversion rates e-commerce businesses grapple with; they are a true revenue drainer.

What is the payment approval rate?

The payment approval rate is the proportion of initial customer payments that ultimately get approved by an online store – an indicator of how much business is lost due to declined transactions. This rate is determined by dividing the number of approved transactions by the number of attempted transactions over a fixed period of time.

Factors leading to higher online payment decline rates

Many issues can prohibit an online transaction from going through at the initial authorisation attempt. These include:

• Incorrect or outdated payment card and account information
• Insufficient funds
• Network unavailability
• The issuer's unspecified "do not honor" declines
• The merchant's fraud and risk mitigation tools
• The card networks’ fraud and risk mitigation tools
• The issuer/processor's fraud and risk mitigation tools

Every bullet on this list can be a legitimate reason for a card decline. However, the ambiguity and misalignment that is common among all entities involved in a payment transaction often lead to transactions that simply should not have failed in the first place. But there are steps you can take to drive higher approval rates.

4 ways to increase approval rates

1.) Apply data to authorisation attempts

Using data-informed services available through a leading payment processing company is key to improving approval rates. A payment processor that has access to large data sets, like Worldpay, can help you achieve better approval rates by using historical transaction data to change key attributes in real time, prior to submitting those transactions to the card networks for authorisation. This improves the changes for approval authorisations.

2.) Get big data insights

As mentioned above, data plays a significant role in driving approvals. Payments data provided at a granular level provide insights into inefficiencies in your payments processing. By determining issuer "performance” (e.g., your company's approval rates at the card products and issuers level) and comparing rates with your peers and other issuers, you can work with your processor to identify problem areas and develop mitigation strategies.

Card updating services allow merchants to submit transactions using the original account information obtained from the cardholder, while the provider ensures that the current account information is used for the authorisation. While this is particularly useful for recurring or subscription billing, it can also apply to merchants who reduce friction in their consumers' experience by storing their payment information for use in subsequent purchases.

3.) Select smart routing

When considering a payments gateway, keep a solution with dynamic routing capabilities in mind. As the hub of the payment processes, your payments gateway enables everything payments related – including your approval rates.

4.) Automate your card updating process

Another way to improve approvals is to use automatic card updating and recycling services. Some payment processors, like Worldpay, offer this type of service that significantly boosts revenue from recurring payments.

Card updating services allow merchants to submit transactions using the original account information obtained from the cardholder while the provider ensures that the current account information is used for the authorisation. While this is particularly useful for recurring or subscription billing, it can also apply to merchants who reduce friction in their consumers' experience by storing their payment information for use in subsequent purchases.

To find out more about how you can use advanced payments data and analytics to achieve higher approval rates for your e-commerce business, contact Worldpay today.