Enhancing the shopping experience with improved authorization rates
08 Jul 2022

By Jim Magats, Senior Vice President, Payments, PayPal

We are living in a time where the e-commerce landscape is growing multifold, with tailwinds from evolved customer preferences leaning toward convenience and frictionless experiences. Businesses, especially MSMEs in India have pivoted to digital and established online shopfloors to take advantage of this growing demand. According to the Global Payment Report 2021[1] by Wordplay FIS, India’s e-commerce industry will grow 84% to $111 billion by 2024 as an effect to the demand created by the global pandemic.

The competitiveness within the space calls for focused efforts from MSMEs in improving customer journey to be at par with other e-commerce platforms and be part of the dynamic sector. It is about turning that consumer into a customer and this journey is all about the user experience, and it is not limited to sleek websites and marketing campaigns. Businesses can retain customers when the end-to-end user experience is taken care of, right from surfing on the website to the payment gateway. Card abandonment in the final stage of purchase is seen quite often. A customer may reach the payment section and get stuck – it can be due to lack of convenient payment methods or because of transaction failure. From my experience in the sector, payment failure has been among the biggest hindrance in online customer sales.

Addressing the problem

To be recognized as a credible business among customers, it is important to solve transaction obstacles. Variety in payment methods is solving only one part of the problem. Key is to address the failed transactions that are taking revenue away from the business.

In order to be a top performing business online, it is important to focus on the bottom line and refine the end-to-end payment ecosystem, ultimately prioritizing customer experience. Improving the authorization rate can be the key to improving the chances of conversion of the transaction and prove to be vital in simplifying the payment process. This means the percentage of transactions that successfully pass through the authorization process to complete a payment.

Most small businesses will come across many failed transactions and declined payments; it is part of doing business online. However, each incomplete transaction needs to be addressed. At the end of the day, better authorization rates convert into better business and eventually, increased revenue.

After thoroughly analyzing the issue, businesses can use the following strategies to align their payment process to increase customer retention.

Know the process

Once the low authorization rate has been flagged, it is important to understand the reason behind failed transactions. There can be several reasons behind this – suspicion of fraud, insufficient funds, or outdated card information. With the rise in online shopping and businesses taking to online selling, fraudsters have found new ways to steal customers’ personal information. It is important for businesses to be careful of authorizing bad or fraudulent payments.

MSMEs dealing with luxury goods and experiences face more authorization failures as customers have likely surpassed their credit limit or merchants are wary of fraud.

It is this understanding of what is leading to transaction failure that can help businesses work towards a solution.

Easy and efficient transactions

A good payment partner can be the key that unlocks payment efficiencies for a business and creates the perfect end-to-end user experience. There are payment partners that offer higher approval rates. A payment partner can leverage customer and vendor data to understand card behavior and identify potential areas of concern.

Having secured methods like network tokenization can also help push authorization rates and help with smooth customer experience.  Network tokenization creates a unique credential for the customer’s card to make transactions. The tokenization helps improve security by making customer credentials more fraud resistant and as a result build brand recognition and trust. Advancements in technology such as machine learning and artificial intelligence help businesses determine the legitimacy of a transaction, reducing fraudulent transactions.

Business can also enable digital wallets to help reduce failed transactions. These come in handy when a customer’s first form of payment is declined. Tools like this help companies understand the root cause of failed transactions and enable a solution led approach and streamline processes.

Improving websites and offering a variety of products are important for businesses looking to expand, however, backend enhancements should not be overlooked. The focus should be on increasing the authorization rates with trustworthy payment partners, building credibility with customers, and ultimately leading to growth in revenue.





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