How Can Merchants Increase Transaction Approval Rates With Real-Time Payment Data?

Payment declines, especially online payments, are volatile and can be approved/declined due to various reasons. While payment approvals don't pose any concerns, a payment decline can hurt customer retention and merchant processing. 

The payments market is seeing a 42% increase, with 27% of the global population shopping online. Imagine the number of payments made through online portals. 

Real-time data, coupled with generative AI, can prove to be a boon to increasing customer engagement while working towards reducing various customer churns. However, despite all the latest technology available, if a business isn't working towards reducing payment declines and improving approvals, there won't be a success story in sight. 

For this reason, let's understand the real issues behind payment declines and what you can do as a business to reduce the impact of such causes.

What Are the Factors Leading to Payment Declines?

Payment declines might seem like an inherent issue, but with the proper treatment, you can nip the problem in the bud and drastically change how you handle your declines. Here are some pertinent reasons to look out for:

1. Incorrect/Outdated Card and Account Information

Customers like to save their card details for a smoother, faster checkout experience. While this might be useful at times as it facilitates recurring subscriptions, at other times, it brings its native inherent risks.

For example, what happens when the card is outdated or expired? The payments will decline in such cases, resulting in a declined transaction. This could even become a reason for an involuntary customer churn, causing a revenue bump.

2. Insufficient Funds in the Customer's Account

Often, customers don't realize they have inadequate funds to purchase. This rule applies to automatic subscriptions and renewals. As frequent subscriptions encounter an insufficient funds scenario, customers must top up their funds and make the necessary arrangements to schedule payments. 

3. Network Unavailability

Network unavailability and technical downtimes directly impact customer payments, as customers cannot make transactions for purchases and expenses. This can be done by a payment processor or an online store. Nonetheless, it causes the payment to decline, making it an omnipresent issue.

4. Unspecified "Do Not Honor" Declines from the Issuing Bank

What happens when the bank dishonors a customer's payment during processing? There can be multiple reasons for this issue, such as customers blocking payments via direct orders, fraud, or any other cause. Whatever the reason, if a bank is suspicious of a payment, it will dishonor the request, leading to a payment decline.

5. Card Network's Fraud and Risk Mitigation Tools

Finally, the last reason for a potential payment decline is attributed to a card issuer's network, fraud, and risk mitigation tools, which play an equally important role in payment declines and decisions. Payment processors have several tools in play to ensure there are no fraudulent transactions on a customer's account, which can tarnish their reputation or the customer's finances. 

How Does Real-Time Payment Data Help in Improving Transaction Approval Rates?

As a business, payment declines are the deadliest, most unwanted aspect. Payment declines reduce your bottom line and create unnecessary revenue reductions crucial to an online business.

You must take a few steps to improve transaction approval rates to ensure the best possible outcomes for your business and customers. Here are a few reasons to invest in real-time payment tracking to improve transactions and increase approval rates:

1. Identifying the Reasons for Retries and Cost

Payment retries cause delays in approvals, impact customer loyalty, and create unnecessary hurdles in profit maximization. When dealing with such transactions, you are increasing your approval time and the cost of rerouting from one payment processor to another.

To ensure you're on top of the payment process, you must reduce the payment retries and costs incurred for payment approvals. One of the most fool-proof ways is to review the potential reasons for payment declines and address the underlying issues sooner rather than later.

2. Optimizing Transaction Routing

Transaction routing is a dynamic process that entails rerouting payments to the most efficient and well-balanced payment processor in real-time. Another valuable method is to employ the services of multiple payment processors and use dynamic routing options to improve the payment channeling process for merchants and customers alike.

By optimizing your payment transactional routes, you can capitalize on the available transaction rates, speed up payment processing, and avoid any unnecessary roadblocks during payment utilization.

3. Adaptive Authorization

With real-time payment insights, the most pertinent benefit is the adaptive authorization criteria, which you can use extensively to avoid fraudulent transactions, prevent risky payments, and reduce transaction fees.

You will employ payment gateways as an online business to collect and receive customer payments. To increase the acceptance rate and reduce payment-related challenges for your customers, you must provide a fool-proof experience that keeps sensitive customer information secure while utilizing low-cost transaction fee structures to enhance profits.

4. Provide Customer Insights and Dynamic Transaction Characteristics

Finally, the most crucial benefit of real-time payment data is valuable customer insights and the details of dynamic transactions. When dealing with multiple customers simultaneously, you will often need help keeping track of their different payment methods, payment categorizations, preferred payment preferences, and modes.

Since each customer has a distinctive payment preference, you can customize the experiences with payment data and use it to enhance the checkout experience for your regular customers. This improves customer experience and promotes loyalty, a must-have in today's customer-centric business models.

What Are the Strategies to Improve Transaction Approval?

You must take a few steps to address payment declines and improve the transaction approval rates. Some common, helpful steps include: 

1. Smart Routing

Smart routing is an excellent method to make the most out of your affiliated payment processors. The smart routing process reduces the downtime for payment processing and enhances the customer's checkout experience on your website. 

Additionally, you can reduce your transaction fee, maximize your approval rate, and increase your revenues by accepting payments quickly. Payment orchestrators like inai provide exceptional smart routing services to improve your payment approvals and increase your payment acceptance scores.

2. Automated Card Updating

The automated card updating process is a unique feature that some of the best payment orchestration platforms provide within their suite of services. Within this feature, you can submit the current cardholder details from the original account as a merchant. These details are used for authorization purposes.

A merchant can request authorization from the card issuer using the current information. The automated card updating process is handy when billing customers via a recurring or subscription-based model.

3. Automated Payment Retry

Automated payment retries, like the computerized card updation feature, prove their worth in the case of failed payments. As a business, you want the best options when resolving failed payments. One option is to monitor the failed payments and retry them repeatedly until the payment is approved. 

However, when the volume of failed payments increases manifold, you want to invest in an automatic system that retries the payments automatically and routes them to different processors for quick approvals. Such dynamic facilities are rare, but payment aggregators like inai offer this as a service.

4. 3DS Consolidation

The 3D Secure payment protocol is a part of the European Union's Secure Customer Authorization (SCA) requirement. In lieu of the regulatory requirements, the 3DS strategy is tailored and customized to maintain and optimize approval rates for merchants and banks, depending on their location. 

The 3DS protocol is necessary from a regulation perspective, which can be tweaked to ensure better acceptability, enhanced approvals, and higher payment realizations. 

5. Network Tokenization

Another ideal way to improve real-time payments and optimize your approval rate is to use network tokenization. Whenever a customer enters their card information, the confidential details are replaced with a card network token, which is unique for both the merchant and the customer.

Once a customer makes a payment, the system transmits the token into card details, which are sent for approval from the card issuer.

The system significantly maps the revised information with the token information when the card details change. This technique allows merchants to increase their approval rates and transaction volumes. An added benefit is that it reduces false declines, leading to the building of a secure and frictionless transaction model.

6. Implementing Advanced Payment Analytics Tools.

Payment analytics are an essential aspect of managing payment insights. They are a treasure trove of customer behaviors that can help you customize payment experiences for your customers. Apart from customization, such tools can go a long way in helping you reduce fraud, mitigate payment-related risks, and enjoy the perks of higher approvals.

AI-driven analytics tools provide insights that can give you valuable information related to payment retries, downtime, failed payments, reasons for payment declines, and customer engagement, amongst other facts.

7. Incorporating Machine Learning Algorithms [For Predictive Modelling]

Adaptation is necessary to capitalize on the existing payment trends and make real-time decisions based on the payment scenarios. Predictive models can also preempt valuable trends related to payment approvals, downtime, transaction-related inflations, and economic factors.

These factors combined are helpful when making data-driven decisions, each of which plays a pivotal role in gauging the required parameters for setting payment approval scenarios.

8. Customizing Payment Processes

By customizing payment processes, you can predict and preempt the customer's requirements to simplify the checkout process. Customers love the ease of transactions; this is one of the primary reasons for saving their card details on their regular e-commerce store beforehand.

AI and ML models play a significant role in deciding payment trends, which are ideal for customizing payment processes. Removing obsolete customer details, dealing with ineffective payment routing processes, and utilizing state-of-the-art technology to process payments while complying with regulatory requirements can help businesses glorify their checkout experiences and add to the customer experience.

Why Choose inai for Your Payment Services?

inai, as a payment aggregator platform, offers its customers a series of AI-driven services. From smart rerouting to real-time customer insights to managing multiple payment gateways from one consolidated platform, there is a little bit of everything for every customer type.

inai empowers merchants to improve their authorization rates, increase 3DS authentication and optimize costs effectively while reducing transaction fees and maximizing transaction approvals for the best results.

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