Payment Approval Rates Analysis: Data Importance & Potential Pitfalls

As businesses strive to optimize their operations and maximize their revenue, they face the need to regularly evaluate their payment approval rates. While keeping this metric up is essential for the company’s performance, many companies don’t know how to tackle this task, as it involves a variety of factors and may seem too complex.

If this sounds like a challenge holding your business back, this article is for you. Here, we will explain what exactly a payment approval rate is, list the potential pitfalls associated with boosting it, and share effective ways of dealing with them so that you can harness the power of this indicator for your company’s benefit. Let’s dive in!

Common Questions About Approval Rates Answered

If you are not familiar with the approval rate concept, getting started with this topic can be overwhelming. Thus, before we discuss the practical tips and tricks of using this metric, let’s review some of the frequently asked questions about it.

What Is Business Payment Data?

It’s a wide range of information associated with a company’s payment transactions, including their amount, completion date, approval rate, and other details. This data is used for payment tracking, analysis, fraud detection, risk management, and other important business purposes.

Why Is Payment Data Important for Businesses?

Payment-related data is important for organizations because it provides them with a detailed overview of their operations. For instance, by analyzing payment approval rates, businesses can gain insights into their payment processing performance, identify areas for improvement, and significantly enhance their customers’ checkout experiences.

What Is a Payment Approval Rate?

It is the percentage of client-initiated payments that were approved and received by a store. It’s calculated by dividing the number of successful payments by the total of attempted transactions within a given period.

In contrast, the payment decline rate is the share of purchases that were rejected due to insufficient funds, financial services errors, and so on.

What Is a Transaction Approval Rate?

The terms “transaction approval rate” and “payment approval rate” essentially mean the same and can be used interchangeably.

What Is a Payment Approval Process?

It is the procedure used to review and approve payment requests, which typically includes a series of checks ensuring that the transaction is accurate and legitimate and confirming that there are sufficient funds to cover the purchase.

While this process can be done manually, the majority of companies use automated services for the sake of scalability and accuracy.

Main Challenges Linked to Boosting the Payment Approval Rate

There are a number of obstacles that can prevent you from succeeding at increasing your business’s payment approval rate, namely:

• The balance between risk and revenue. To increase payment approval rates, businesses may need to loosen their fraud detection and prevention measures, which can increase the risk of fraudulent transactions. Finding the right balance is key to ensure that approval rates increase without compromising security.
• Limited payment options. A small selection of payment methods can result in lower payment approval rates, as consumers may not find their preferred options. Thus, make sure you analyze the needs of your target audience and provide them with appropriate payment options.
• Technical issues. Technical problems, such as website downtime or payment gateway issues, can result in decreased payment approval rates - ensuring that the payment processing systems are reliable and functioning correctly is essential to maintain them at a good level.
• Inefficient payment processing. Using outdated software or choosing the wrong payment service provider to partner with can result in longer transaction times, which will inevitably affect transaction approval rates. Implementing state-of-the-art payment solutions and collaborating only with reliable PSPs can help you tackle this challenge.
• Payment disputes. Disputed payments can cause delays in payment processing, which can lead to decreased approval rates. So, it’s important that you focus on resolving them promptly and efficiently.

If you learn to resolve these challenges with the tips provided above, you are sure to be able to maintain your company’s payment approval rate at a decent level and increase it over time. But are there any additional actions that can be helpful in achieving it? Check out the tips below!

How Can I Increase My Approval Rate?

Aside from sorting out the existing issues holding the payment approval rates back, business owners can also undertake additional actions to boost the figures. The top three initiatives that are likely to result in the most significant impact are:

1. Expanding Data Access Beyond the Authorization Stream

Merchants employ various methods to prevent fraud and verify identities in online payments. However, they often rely on a restricted set of data provided through the authorization stream, which may not accurately reflect a customer's risk profile.

The issuing bank often only compares purchase data to the address listed on the cardholder’s account, which can cause issues when the customer needs the order to be delivered to a location other than their primary residence.

Therefore, it's crucial for merchants to supplement their decision-making with additional data sources to better assess customer risk profiles.

2. Fostering Knowledge-Sharing Between Merchants and Issuers

Collaboration and data-sharing between merchants and issuers can help identify common fraud patterns and develop effective joint strategies to combat fraud and reduce false positives, which would ultimately lead to higher payment approval rates.

3. Adopting a Holistic Approach

Implementing a holistic approach involves taking a comprehensive view of transaction approval rates and considering all the factors that can impact them. This can include not only payment processing and data analysis, but also aspects, such as customer experience, product quality, and marketing efforts.

What’s more, the adoption of this tactic may result not only in boosting payment approval rates but also in a general improvement in business processes.

Summing Up: Critical Aspects to Keep in Mind

If, while reading this guide, you have noticed that your business ticks a lot of the boxes when it comes to the pitfalls associated with this indicator, it’s best to start working on tackling these issues without delay using the tips we provided. Remember that a thought-through strategy, detailed analysis, and consistent progress are key to long-term payment approval rate improvement!