What is payment acceptance rate and why does it matter?

Your payment acceptance rate (AR) measures the proportion of successful payments out of all attempted payments.

Every business should place its payment acceptance rate at the heart of how they track and understand success, as it’s one of the best insights you have into the effectiveness of your payment process and whether or not improvements need to be made.

Best of all, your payment acceptance rate is relatively easy to measure and utilize. But what factors influence it? And how can you improve it if you discover that you’re experiencing a high rate of declines?

In this article, you’ll discover why payment acceptance rate matters and how Checkout.com can help you improve it.  

Payment acceptance rate explained

Your payment acceptance rate is simply the percentage of transactions that are successful out of all payment attempts. The exact definition can vary depending on who you ask, but at Checkout.com, we define acceptance rate as the number of successfully authorized payments out of all attempted payments.

To calculate your payment acceptance rate, simply take the number of successful payments, divide it by the number of attempted payments, and multiply that figure by 100. You should be able to pull all the relevant data from your payment system.

Expressed as a formula, your payment acceptance rate looks like this: (successful authorizations / requested payments) x 100%

For example, if 412 of 500 payment attempts were authorized, your payment acceptance rate would be 82.4%.

Variations in acceptance rate definitions include whether or not you include payment requests which are later found to be fraudulent, and whether or not you include retries from the same customer. The latter is known as "net acceptance rate" – it's a de-duplicated acceptance rate which takes into account the same customer potentially attempting payment with multiple payment methods, for example.

It's hard to define a good acceptance rate benchmark as there are so many variables involved: your line of business, customers' preferred payment methods, the way you are calculating AR, the market you're transacting in, and your goals as a business.

Why is payment acceptance rate important?

Your payment acceptance rate is important because it measures the success of your payment processing. If the technology isn't working as it should, you're losing revenue – and turning off customers.

Why? An eyebrow-raising 45% of consumers told us they won't try a payment again after a false decline. It's just too time-consuming to re-attempt a failed payment, and trust has already been lost. Most of the time, consumers in this scenario will go straight to a competitor to make their purchase.

If your rate is high, there's a good chance you're maximizing revenue yields and customer satisfaction. To help you reduce the proportion of false declines – and keep funds reliably flowing into your business, Checkout.com introduced Intelligent Acceptance. This is a machine learning tool that our in-house payment analysts use to maximize business revenues without compromising on fraud security.

Read more: Why acceptance rates matter to your business

What can influence payment acceptance rates?

Many factors influence your payment acceptance rate, some within and some outside of your control. Understanding them is the first step towards solving any issues.

Some common factors that affect payment acceptance are:

• Lack of funds - one of the most common reasons for a payment not being accepted is simply that the customer doesn’t have enough money in their bank account.
• Incorrect details - when the customer enters the wrong PIN (if present) or CVV number (if making an online transaction), the payment will be declined.
• Technical issues - anyone involved in the transaction flow, from the payment provider to the acquirer, could experience a technical glitch that derails the acceptance of the payment. For example, a sudden internet outage or even scheduled downtime for maintenance.
• Risk assessment fail - many transactions now require the customer to complete 3D Secure or another two-step authentication method (such as supplying biometric data) before they can be approved. If the customer fails any of these authentication steps, by, for example, not matching the correct cardholder data, the transaction will be blocked to prevent attempted fraud. Sometimes your fraud-detecting system can block legitimate transactions, resulting in a false decline.
• Issuer block - an issuer may also decide to block a transaction if it is considered suitably high-risk or suspicious. For example, if the merchant involved in the transaction is involved in a high-risk industry like gambling or is based in a country with a reputation for fraud.

How to improve your payment acceptance rates

If your payment acceptance rate slips below where it needs to be, there are steps you can take to get it back up to a healthy level. You should never aim to reach 100% (after all, you must block fraudulent payments) but even incremental improvements can have a big impact on revenue. Here’s our advice for improving your payment acceptance rates:  

Local acquiring

When you take a payment from a customer, the acquirer requests authorization from the issuer. Nuances of the way technical messages are sent between these two institutions impact the final decision to authorize the payment request or reject it. Due to familiarity among local banks, using a local acquirer can improve acceptance rates – meaning you should consider using a payment services provider (PSP) which offers local acquiring in your chosen markets.

Online marketplace Vinted tapped Checkout.com for its local acquiring licenses which, combined with other techniques, contributed to an acceptance rate uplift of 4.15%.

Debug payment flow problems

When you take credit card payments, there are many points where technical problems could cause the payment to fail. A major way to increase acceptance rate is to find and fix any issues on your side. You can use a tool such as Integration Health from Checkout.com to identify opportunities to improve payment request data quality, correct errors in gateway configuration, and locate problems with your API connection.

Sometimes it helps to have a dedicated payment expert look into your tech stack, too. For instance, debugging sessions between the payment teams at Jow and Checkout.com fixed problems relating to 3DS Authentication, contributing to an acceptance rate of over 99%.

Offer alternative payment methods

The more payment methods you can offer to your customers, the better. It’s not uncommon for customers to abandon their purchase if their preferred method isn’t an option. For example, if a customer's first attempted payment with their credit card is declined due to insufficient funds, you could still capture funds if that customer is able to use buy now, pay later (BNPL) to complete their purchase.

Collect the right data for improved fraud detection

If you’re experiencing a high rate of false declines, you may need to make improvements to your fraud monitoring systems. Over-zealous fraud detection engines can impair your revenue by erroneously blocking legitimate payment attempts. You can use toolkits such as Risk.js to collect session data such as payment IP, device fingerprint, device IP, device OS, and browser type to help improve acceptance rates and fraud outcomes.

Choose a strong PSP

If your PSP only offers payment processing – rather than acquiring and issuing in addition, as Checkout.com does – there is a hard limit on the types of data they can provide. So you could end up without the data you need to correctly analyze your acceptance rates. Few roadblocks stymy revenue uplift more than a paucity of data. Take care to select a PSP that can provide the best data, tools, and on-hand support to set your acceptance rates on the right trajectory.

Improve acceptance rates with Checkout.com

At Checkout.com, we're experts at helping you to win the revenue your business deserves. Although the performance of payment technology is easily overlooked, it's critical to maximizing customer satisfaction and retaining buyers.

Payment processing is fraught with complexity – differing issuer preferences, local card scheme requirements, and global regulatory changes are just a few of the main challenges. That's why a competitive business needs sophisticated payment technology plus best-in-class expertise to ensure transactions succeed.

Global merchant such as Uber use the Checkout.com machine learning engine Intelligent Acceptance to improve acceptance rates while maintaining strong defences against fraud.