Authorization OptimizationTips to Prevent Declines & Process More Transactions

Authorization Optimization: How to Increase Your Auth Rate

Your customer has a credit card that works everywhere else. But it gets declined at your checkout. What’s up?

You’ll hear that question from customers, and you’ll probably ask it yourself when you look at your declines. The card is good. The customer is real. The issuer said “no” anyway.

It’s something I’ve heard a lot of merchants complain about. And yeah, some of those declines you can’t really do anything about. Most of them you can, though. And the work of preventing those declines has a name: authorization optimization.

In this post, I’ll show you how your authorization rate is measured, why issuers decline good transactions, and 16 changes that get more approved.

What Is Authorization Optimization?

So, what do I mean when I talk about “authorization optimization?”

Authorization optimization is the refining of processes to ensure a higher authorization success rate from card-issuing banks. It involves employing strategies such as regularly updating customer card information, using fraud detection tools, and ensuring your checkout process is streamlined and user-friendly.

It’s also a proactive move for problem solving. Establishing strong relationships with acquiring banks and understanding the specific decline codes can help address and prevent transaction issues. You can pave the way for smoother and more efficient transactions by addressing common hitches and potential errors in the system.

The benefits are threefold. First, a seamless transaction process improves customer satisfaction. After all, no customer appreciates facing card declines, particularly when they’re certain of their account’s solvency.

Consistent, successful transactions enhance your rapport with payment processors and banks. Over time, this credibility could translate to more favorable processing rates and conditions.

Finally, by minimizing false declines, you can cut back on the operational costs. So, authorization optimization aids in revenue flow and also solidifies customer trust and loyalty.

How Is Your Authorization Rate Actually Measured?

Remember: your authorization rate refers to the percentage of transaction attempts that are successfully approved by cardholders’ banks. Higher authorization rates mean more successful transactions, while lower rates may indicate issues in the payment process that need to be addressed.

Before we can start optimizing, though, we have to ensure we have a clear benchmark.

To calculate your authorization rate, you take the number of approved transactions, divide it by the total number of attempted transactions (both approved and declined), and then multiply the result by 100 to get a percentage. Understanding and analyzing transactions that weren’t approved helps identify issues in the payment process.

That formula gives you the raw rate. Two other versions are in common use, though, and providers do not always say which one they mean when they talk about your auth rate.

Rate	What it counts	What it hides
Raw	Every authorization request, including every retry of the same order.	Retries drag it down. Five attempts on one card count as one approval and four declines.
Deduplicated	One result per customer purchase attempt, however many times it was retried.	Your retry logic. A merchant that retries badly and one that retries well look the same.
Normalized	The deduplicated rate with declines no merchant could avoid removed, or adjusted for card and region mix. Definitions vary by provider.	Your actual outcome. It exists so two providers can be compared on the same footing.

Illustrative example

Same Orders. Three Authorization Rates.

16 customer orders sent 22 authorization requests. The 14 approvals flow through unchanged; each rate just stops counting something the one before it counted.

16 orders, one column each · 22 requests, one square each

12 approved on the first request4 declined at least once

• Approved
• Declined, retried
• Declined, order lost
• Insufficient funds

1. Raw63.6%14 ÷ 22 requests
2. Deduplicated87.5%14 ÷ 16 orders
3. Normalized93.3%14 ÷ 15 orders

14 approvals in every rate

1 order lost

6 retries collapse into the orders they belong to

Insufficient funds removed as unavoidable

A provider that quotes a 95% authorization rate among their merchants may mean normalized. Your dashboard showing 88% may mean raw. Neither is wrong; they are not the same measurement, and that is the whole thing.

Why Do Authorization Requests Get Declined?

Perhaps the most obvious cause of authorization declines is insufficient funds, meaning the cardholder doesn’t have enough money in their account to complete the transaction. Suspected fraud is another obvious reason. But, not every transaction that gets declined is due to insufficient funds or fraudulent activities.

There are many instances in which system glitches, errors made by merchants, or miscommunications between banks and processors lead to declines. Some issues that commonly result in decline codes include:

• Exceeded Credit Limit: The cardholder may have used up their available credit limit, and thus has no available funds.
• Expired Card: Some cardholders might not realize their card has expired and continue to use it.
• Incorrect Security Code: The cardholder might have entered the wrong CVV number. This could simply be a typo.
• Invalid Card Number: The bank associated with the card can’t be identified, or the card number does not link to a valid account.
• Invalid Transaction: The transaction type is not valid for that card or that issuer. The issuer will not approve a resubmission.
• Transaction Not Permitted: The card is not enabled for this kind of transaction, such as online or cross-border purchases. Also not one to resubmit.
• Do Not Honor: The issuer declined and gave no reason. This is tied to decline code 05, the catch-all response.

When your authorization procedures are not up to par, you’re likely to see an increase in transaction declines. This could stem from your system’s inability to effectively manage various transaction types, handle the requirements of different card issuers, or meet diverse security requirements.

Not using account updater services for recurring payments can also cause declines, especially when dealing with expired or outdated card information. These declines are not just missed sales opportunities; they contribute to a negative customer experience. They leave customers frustrated and without the products or services they were trying to purchase. Over time, this can damage your reputation and erode customer trust, potentially resulting in a loss of business.

Tips to Prevent Declines & Optimize Authorization Rates

A streamlined, intuitive front-end experience is key for any eCommerce platform aiming to minimize declines and ensure a seamless checkout process. Implementing features such as hosted fields, a tailored user interface, and consistent branding aesthetics can improve the user experience.

To illustrate how a few best practices can help, here are 17 tips for preventing declines through authorization optimization:

#1 |  Address Account Updaters

Make sure your payment gateway or processor is equipped with account updater services, like Visa Account Updater or Mastercard Automatic Billing Updater. These tools automatically refresh expired or outdated card information, which is what matters most for recurring payments.

#2 |  Build Strong Banking Relationships

Forge and maintain positive relationships with your acquiring bank. This will help you facilitate smoother transaction processing and potentially negotiate better terms. You can do this by being responsive to all messages, and keeping up with your point of contact at the institution.

#3 |  Educate Your Staff

Equip your staff with the necessary knowledge and skills to handle transaction issues efficiently, ensuring they can guide customers through any issues that may arise. Your staff members are on the front line. They could make the difference between a satisfied customer and a rejected order.

#4 |  Enhance Your Checkout Experience

Create a user-friendly, intuitive checkout experience. This will help minimize user errors like misentering card information or accidentally skipping fields during checkout. Many of the same practices that prevent shopping cart abandonment apply here. You can kill two birds with one stone.

#5 |  Implement Intelligent Retry Logic

Many auth declines result from temporary circumstances. For instance, there may be a hold in place on the buyer’s account that temporarily lowers their available credit. Using systems that retry transactions that fail due to temporary issues can let you capture sales that might have otherwise been lost.

Not every decline can be retried. Under Visa’s rules on declined transaction resubmission, the response code decides what you may do next; either do not reattempt, reattempt later, or fix the data and resubmit. Mastercard sends a merchant advice code alongside the decline.

In practice, most retry systems only check whether the last attempt failed. Check whether yours reads the code.

#6 |  Implement Tokenization

Use network tokens in place of the card number for repeat customers and stored credentials. For eCommerce merchants, accepting mobile payment apps like Apple Pay is a good way to take advantage of tokenization technology.

There are two kinds of token, and only one helps here. A vault token from your gateway protects stored card data and does nothing for approvals. A network token, issued through Visa Token Service or Mastercard MDES, replaces the card number inside the authorization request itself.

When the issuer reissues the card, the network token stays valid, so the request does not fail on a dead credential. Apple Pay works the same way: the device sends a Device Account Number, never the card number. So, if your gateway offers network tokens, turn them on.

#7 |  Keep Your Business Information Up to Date

Double-check that all your contact information and business details are current and match the records held by your bank. Take merchant category codes, for instance; if your MCC does not match your products, then banks may reject sales as suspicious according to the standards for the incorrect MCC.

#8 |  Leverage Machine Learning

Machine learning tools can help you analyze transaction data with greater insight and identify issues that might not be immediately apparent. You can proactively address issues in real time that could lead to declines.

#9 |  Monitor & Analyze Declines

When declines do happen, embrace them as learning opportunities. Regularly review your transaction declines to try and identify patterns or common issues. If you see commonalities between declines, you can develop and implement targeted strategies to address them.

#10 |  Offer Multiple Payment Options

Providing more options means that, even if one payment method fails, the buyer may retry the transaction using a different payment method. Diversify your options to accommodate customers’ preferences and capture sales that might be lost due to credit card declines.

#11 |  Optimize for Mobile

Ensure that your payment process is fully optimized for mobile users. With the increasing prevalence of mobile transactions, a smooth mobile payment experience is key to avoiding typos and misentered information, as well as the resulting transaction declines.

#12 |  Route Across More Than One Acquirer

Issuers do not see your business. They see an acquirer, a country, and a BIN. Some issuers approve more readily when the acquirer sits in the cardholder’s own country.

If a real share of your sales is cross-border, a second acquirer in that market changes what the issuer sees. So does local acquiring through your existing processor. If your sales are domestic and one acquirer handles them, a second acquirer is unnecessary, and only means added integration costs for nothing.

If a failed request is resent through another acquirer, that should be counted as a reattempt under the Visa rules mentioned in tip #5. Check your declines by issuer country before you add anything.

#13 |  Use Pre-Authorizations

Implement a pre-authorization process for certain transactions, especially large ones. Preauths temporarily hold a certain amount on the customer’s card to ensure they have sufficient funds. This is particularly helpful in sectors like hospitality, where the final total may not be known at the time of checkout.

#14 |  Regularly Update Settings

Keep your fraud detection settings fine-tuned to balance security with user experience, avoiding overly stringent settings that can lead to false positives. This can help banks with decisioning, as they may be alerted by repeated rejections at the merchant level, and come to assume that a buyer is not authorized.

#15 |  Understand Decline Codes

When transactions are declined, you'll receive specific decline codes. You should not simply sit on this information. Instead, you should review it and try to learn from it. Understanding these codes can help address the issue directly and prevent future declines.

#16 |  Adopt a Multilayer Strategy

Use the Address Verification Service (AVS) to compare the billing address the customer entered with the one on file at the issuer. The CVV check confirms the customer has the card in hand. While a mismatch doesn’t necessarily mean a transaction is fraudulent, it adds an extra layer of security, further assisting with banks’ decisioning.

Remember that AVS only works for cards issued in the US, the UK, and Canada, though. A mismatch on any other card tells you nothing.

#17 |  Study Your Response Codes

Before you change your retry logic or add an acquirer, check what your gateway is actually passing through. Some gateways collapse every issuer response into a generic decline, and you never see the code at all. If that is what you are looking at, nothing above can be measured.

Get the raw response code on every decline. Sort the last 30 days by code. Whichever category comes up most often is where your next 30 days go. In my experience, the retry logic can often mean more than your fraud rules.

Just One of Many Options to Recoup Revenue

Every declined transaction is a missed opportunity. It’s an interruption in the seamless customer journey that all merchants strive for.

By investing time and resources into authorization optimization, though, you are paving the way for smoother transactions, fostering trust, and ultimately driving growth. Taking the steps outlined above could decide whether your next transaction succeeds or fails.

Of course, authorization optimization is just one path that you can pursue to recover revenue. There’s also refining your refund policy, fine-tuning your refund policy... also fighting and preventing chargebacks.

Chargebacks911® helps merchants recover revenue with performance-based pricing tied to your results. If you would like to see where your dispute numbers stand, contact me for a no-obligation analysis today.