How To Optimize Your Authorization Rates and Collect More Revenue

What are authorization rates, and why are they important?

There are now several ways to pay online, from digital wallets to cryptocurrency; nevertheless, cards remain at the top. When payments are made via cards, the amount is temporarily put on hold until the card holder’s institution releases or rejects the transaction.

Reasons Your Authorization Rates Might Be Low

Safeguards are in place to protect consumers and businesses, and as a result, failed transactions are a normal part of any system. Low authorization rates are a sign of a problem (or problems) disrupting the system. The following are some of the main issues to look out for.

1. Network Declines

Network declines come from banks as they can halt and deny consumer payments. This allows financial institutions to protect their clients from fraud and other unauthorized transactions.

2. Cross-border Payments

You may have difficulties with transactions made outside of the cardholder’s country. One issue comes from variance in currencies. Those with high rates of fluctuation are more likely to fail. You will have the most success if the transaction occurs with the same currency and within the same region as the card issuer because they are less likely to be marked as scams.

3. Data Laws (PSD2)

Within the past few years, new legislation sprouted in Europe. Specifically, the Payment Services Directive 2 (PSD2), which aims to enhance eCommerce security by requiring multi-factor authentication. Authentication requires two of the following:

  • something the cardholder has (like a phone)
  • something the cardholder knows (like a password)
  • something unique to the cardholder (like a fingerprint)

4. Inferior Fraud Screening & Prevention

When potential fraud is detected, a card will be declined to protect the client and their funds. If your business has a turbulent history with fraudulent chargebacks, is in a high-risk industry, or both, then your transactions are more likely to fail. Using up-to-date risk screening tools is essential to protect your business, have high authorization rates by lowering declines and to ensure a low chargeback rate after authorization.

5. State of Technology

Consumers, merchants, card issuers, and banks are all bound by the technology they use. Unfortunately, some are still using outdated technology, which lacks many of the benefits of new and emerging technology. Security tends to be less robust, which means higher fraud rates, and there are fewer features supporting authorization (i.e., automated retries).

6. Network Availability

The volume of online shoppers has dramatically increased over the past two years, and your network must be able to support the increase in numbers. Network downtime, especially during high traffic times, means more incomplete transactions.

Best Practices for Improving Your Card Authorization Rates

Now that you know some of the common issues that reduce authorization rates, it is time to increase those rates and implement new strategies to boost incoming revenue.

Optimize Payment Flows

The payment process is the climax of the shopper’s journey, and it is a critical point to increase sales. Whether transactions occur in person or digitally, they should be quick, concise, and seamless.

Manage Fraud Rates

Fraud comes in several forms, but there are ways to reduce the number of successful attempts. 2Checkout recommends a combination of prevention measures, including validation keys, flagging negative patrons, and device tracking. In addition, you and your team will need education and training to spot and prevent phishing attacks.

Improved Authentication Mechanisms

Rising cybercrime rates have made consumers cautious, but authentication can help protect your customers and improve payment success. Some options include:

  • Tokenization — sensitive data is turned into a random string of characters called a token sent instead of the client’s details.
  • Multi-factor authentication — the user verifies their identity in multiple ways. Usually, a password and a push notification.
  • Comparisons — compares consumer information to their bank’s information of the consumer.
  • Validation keys — phone calls, texts, or emails provide the patron with a code that must be presented to confirm their identity.

Frictionless Flows

Using frictionless flows in the scenario of data laws is a great way to improve the shopping experience for the shopper and also to reduce 3DS authentication errors. Whenever possible, take advantage of all PSD2 exemptions on out of scope transactions such as Low Value, Low Risk or Recurring transactions but also of Merchant Initiated transactions as a follow-up to already authentication Customer Initiated Transactions.

Collect Billing Information

As mentioned above, customer information can be compared to their bank’s data to authenticate a purchase. Typically, this is billing information, and if there are discrepancies, the bank will reject the transaction.

Use Revenue Recovery Tools

These tools are a great resource to use to gain revenue from details that may get overlooked:

  • Account Updater scans credit card information and searches for expired cards. When an expired card is found, it will update it to the new expiration date.
  • Intelligent Routing directs payments through the best routes for authorization.
  • Automatic Retry automatically retries failed transactions.

Accept Different Payment Methods

Alternative payment methods like digital wallets are another great way to boost revenue and grow your authorization rate. Digital wallets are less likely to have transaction failure because there are no lost, stolen or expired cards to manage. Also, they tend to have stronger authentication, which means they are less likely to be marked as fraudulent purchases.

Use a Reseller Model

A less known aspect about auth rates is that they are greatly dependent on the type of processors you use for your business. In general, merchants working with Payment Service Providers (PSPs) have their transactions processed based on the merchant’s location. This means that working with a PSP when selling cross border could in fact be negatively impacting your authorization rate, as the seller has to take action themselves in order to process transactions locally in different geographies.

Conclusion

Ecommerce is on the rise and will continue to expand, but merchants need to be proactive to ensure their users’ payments are approved and the business’ authorization rate stays high.

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2Checkout (now Verifone)

2Checkout (now Verifone)

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2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.