Your payment acceptance rate shows how many attempted payments go through successfully. This metric is essential for any e-commerce business, and improving it can significantly increase your revenue.
Here you’ll find out how to calculate your payment acceptance rate, why you should try to increase it, and what challenges you may face along the way. We’ll explain how seemingly simple things, such as payment methods and checkout flow, can impact your acceptance rates and advise how to find the best partner for your payments.
What is payment acceptance?
The payment acceptance rate, or payment approval rate, shows the percentage of successful payment attempts. This metric helps businesses optimize payments and revenue. When talking about card payments, this rate is also called the authorization rate.
Acceptance rates are crucial to businesses of all sizes. Even a one percent increase in payment acceptance rates can mean more revenue. Large corporations often have teams dedicated to building an intuitive payment experience for their clients, but businesses of any size can improve their payment acceptance rate with the right techniques and partners.
How to calculate payment acceptance rates
The formula to calculate payment acceptance rates is successful transactions divided by total transaction attempts. Multiply this number by 100, and you’ll get your payment acceptance percentage.
For example, if 10 out of 100 transactions fail, your acceptance rate is 90%.
Average payment acceptance rates vary greatly depending on the country, payment methods, billing cycle (monthly/annual), and payment type (one-time/recurring). The most effective way to analyze your acceptance rate is by segmenting your transactions.
Instead of analyzing your metric against all transactions, try to segment your acceptance rates based on different criteria.
Benefits of a high payment acceptance rate
Increasing your payment acceptance rates can bring various benefits. The most obvious one is higher revenue, but there are more advantages.
Depending on your transaction value, even a slightly higher acceptance rate can increase your revenue. Investing in payment infrastructure improvements, offering more payment methods, and making your checkout more convenient can generate more money for your business.
Better customer experience
If you have high payment acceptance rates, you’ll know that your customers are happy with their checkout experience.
One of the main reasons for abandoned carts is a lack of preferred payment methods or suspicious-seeming checkouts. Fixing these problems can improve your customer experience and boost payment acceptance rates.
Reduced payment-related issues
Low payment acceptance rates can signal that you have payment-related issues. And these issues can be a significant cost to your business.
For example, merchants are often charged an authorization fee per transaction, even if a card payment fails or is declined. This means that each transaction, even a failed one, can cost your business. Offering multiple payment methods can help you solve this problem and increase acceptance rates.
A simple and convenient checkout can increase consumer trust and ensure your business sees more returning customers. If your checkout is smooth, it can be the defining factor for shoppers when they choose between similar services.
Payment acceptance challenges
While increasing payment acceptance rates surely brings various benefits, getting there can be challenging. Here are the main risks that you should consider:
High transaction costs
As mentioned above, merchants may still have to pay for declined card transactions. In the European Economic Area alone, it's estimated that failed transactions cost up to $40 billion a year in fees, labor, and lost business. Part of that huge loss could be recovered by increasing payment acceptance rates.
Working with multiple payment service providers (PSPs) or other third-party providers can increase security risks. While most providers can ensure the highest security standards, if they experience a cybersecurity breach, your business may also be affected.
The more parties are involved in the payment process, the more your checkout is dependent on external services and their uptime. For example, if one of the parties has a scheduled downtime, your payment infrastructure may also experience an outage.
Different countries may have different payment regulations in place. This means that international businesses must comply with relevant regulations to accept payments in a certain country.
For example, all payments in the EU must respond to Strong Customer Authentication (SCA) requirements for security reasons. Choosing a payment service provider with wide coverage may help merchants resolve all regulation-related matters across multiple markets.
Limited payment options
According to the Study on New Digital Payment Methods, when it comes to preferred payment options, “the methods needed to be quick, convenient, safe and widely accepted.” Consumers expect to see their preferred payment options at the checkout. If they’re absent, shoppers are likely to abandon their digital carts.
Partnering with a payment infrastructure provider such as kevin. can help companies offer quick and convenient payment options. An online retailer Slevomat launched its own payment method Slevomat Pay, which quickly became its consumers’ preferred payment option.
Payment processing systems occasionally have scheduled or unplanned downtimes. Whenever this occurs, your business may not be able to accept payments. Typically, scheduled maintenance works that may affect merchants are clearly communicated in advance, but not all downtimes can be planned.
The best solution to this challenge is to minimize the number of third-party providers in your payment process. And you should only choose partners with the highest possible uptime.
How to improve payment acceptance rates
Even the slightest improvement in payment acceptance rates can increase your revenue. Here are some suggestions on how you can improve your payment acceptance.
Choose the right partner
Choosing a resilient payment infrastructure provider with wide coverage can solve multiple challenges. These can include compliance with payment regulations across different countries, lowering the risk of unexpected downtimes, and other technical challenges.
Once you have a partner like kevin., you can focus on providing the best service to your customers while we take care of what we know best - payments.
Track and measure payment acceptance rates
Tracking your business’ payment acceptance rates will provide you with valuable insights. You can see how your rates change over time and identify what affects them. Having this information, you can build an effective strategy for generating more revenue.
Improve your checkout
A simple, convenient, and smooth checkout can help you improve payment acceptance rates. Checkouts with multiple steps and forms with excessive mandatory data inputs can drastically reduce your payment acceptance rates.
You should carefully consider what data your clients need to type in when paying and ensure you’re providing them with a convenient way to do it.
Accept multiple payment methods
We’ve already covered the importance of offering various payment options, including the ones your customers prefer. Another benefit alternative payment methods can bring is reduced payment acceptance costs.
For example, card payment processing can include up to 16 different fees! And merchants may have to pay for declined transactions too. Account-to-account payments can eliminate all these fees by reducing the intermediaries involved in the payment process.
Build your business with kevin.
Partner with kevin. to increase your payment acceptance rates. We can help you build a smooth and convenient checkout without any unnecessary intermediaries. Our modern payment infrastructure will enable you to focus on what’s most important for your business while we take care of payments.