Optimize authorization rates: How to optimize authorization rates to help boost conversion and drive revenue

Focusing on digital "last mile" and the payment experience can help increase transaction authorization rates - and revenue - while maintaining customer satisfaction and reducing customer churn.

Everyone in your organization is focused on growing your bottom line. From product offerings and marketing channels to website design and customer experience – it all leads to that final stage: checkout and payment. But if payment isn’t authorized, the transaction goes uncompleted and you may lose a customer and go unpaid. In the case of fraud, this may result in unnecessary transaction costs.

Optimizing the user experience

A successful checkout experience relies heavily on a streamlined end-to-end process for your customers. Each transition represents an opportunity to increase efficiency and boost conversions:

  • Increased Cart Abandonment: 26% of shoppers have abandoned a shopping cart when preferred payment method is unavailable.5
  • Decreased Conversions: 80% of online customers leave without placing an item in the shopping cart.4
  • Declined Transactions: 13.5% of respondents have experienced at least one of their transactions being declined over the previous 3 months.6

A fast, user-friendly front-end experience should include:

  • An ecommerce platform designed to reduce cart abandonment and facilitate a smooth checkout.
  • Tools like hosted fields and a customized user interface, coupled with consistency in website look and feel.

An efficient, secure back-end conversion process can then help bring transactions down the final stretch, and increase transaction authorization rates.

Top four ways to help improve the authorization process

  1. Optimize checkout

    Easy Navigation. Provide customers with a clean, consistent checkout experience that offers little room for error.

    Checkouts. Whether online or via a mobile app, checkouts should be easy to navigate and look like a natural extension of your website.

    Visibility. Ensure that customers’ credit card and Card Verification Value (CVV) numbers are visible to them as they type – don’t asterisk-out the information. This can help ensure that they correctly enter their information the first time. Presenting a mobile-friendly keyboard – in this case, a number keyboard – can also help make the process smoother.

    Stored payment information. Help speed up the process and drive authorization rates by allowing return customers to store their payment information. PayPal can securely store payment details so that customers can select a payment method without running the risk of mistyping key details.

    Current customer data. Checkouts filled with expired cards, old addresses, or other outdated information can potentially lead to higher declines. Through the use of payment vaults, PayPal helps support companies by:

    • Removing expired cards from customers’ stored payment options.
    • Presenting the most recent card as a default payment method.
    • Making it easy for customers to update payment details.
    • Proactively communicating with a customer when a card expires.
  2. Provide instant feedback

    Many declined transactions may be the result of simple user error, such as unintentional card number typos – especially common for mobile users. Some customers might miss a field altogether. By flagging these innocent mistakes before customers submit their orders, you can minimize declines.

  3. Focus on high-converting payment methods

    According to research, the average online shopping cart abandonment rate is 69.57%.7 For a large company, even a small percentage of cart abandonment can have a substantial negative impact on annual revenue optimization.

    To help avoid abandonment and transaction declines, offer customers alternative payment methods that have high conversion rates.

    PayPal Wallet and Venmo provide customers with convenience, and using PayPal Wallet can enable close to 99% approval rates in some cases.9 PayPal One Touch gives customers the option of checking out without repeatedly having to enter usernames and passwords for their 16-digit card numbers, simplifying the process and reducing decline-triggering errors. In fact, using PayPal has been shown to increase checkout conversion by 28%.9

    PayPal Pay in 410 is an interest-free installment solution that helps increase customers’ purchasing power by letting them buy now and pay later. Of buy now, pay later users, 51% have abandoned a purchase due to not seeing a buy now, pay later option.11 In fact, PayPal users are 2.8 times more likely to make a purchase on a site where PayPal is visible early in the shopper’s journey.12 And offering PayPal has been shown to increase checkout conversion by 28%.13

  4. Avoid overly complex fraud protection

    Building the right security steps into the checkout process can also help improve authorization rates. By using Address Verification Service (AVS) and requiring CVV, you can give your customers more specific feedback when declines do occur, and offer suggestions to correct the problem.

    Just as important is striking that delicate balance between strong fraud protection and positive authorization rates. Oftentimes, overly complex fraud detection rules result in false declines of good transactions. Using machine-learning technology and real-time risk assessment can help you detect fraud without rejecting legitimate transactions and creating unnecessary customer churn.

Understanding and solving for decline rates

A declined payment does not automatically translate into a lost sale. In fact, if you correctly identify the source of the decline, provide customers with helpful feedback, and offer payment alternatives, you can quickly put a transaction back on track.

In a recent win, PayPal lifted the PayPal user approval rate for an online payment business which resulted in a 2.8% increase in authorizations.14 When an authorization fails, PayPal helps you clarify the cause of the declines, along with the specific authorization decline code.

There are four main types of transaction authorization declines:

  1. Insufficient funds declines.
  2. Administrative declines.
  3. Lifecycle management declines.
  4. Security and policy declines.
  1. Insufficient funds declines

    By leveraging PayPal’s multiple payment options – including PayPal Wallet and Venmo – your company can help drive conversion and sales performance. By offering a range of other digital wallets – such as Google Pay, Apple Pay, and Samsung Pay – as well as local payment methods to help accommodate the preferences of customers in their local markets, PayPal gives consumers access to multiple funding options, which can help drive conversion and add to your bottom line. The variety of payment options can help decrease the likelihood of insufficient funds and lead to increased sales.

  2. Administrative declines

    Administrative declines occur as a result of configuration errors or transaction format and structure. The PayPal integration team ensures proper onboarding and comprehensive testing to ensure that administrative declines are not a factor.

  3. Lifecycle management declines

    Lifecycle management declines are triggered by expired customer payment credentials and information. PayPal’s robust collection of data, 2-sided networks, Vault Technology, Account Updater tools, and more, can help you maintain accurate and current customer payment credentials to help capture seemingly lost sales.

  4. Security and policy declines

    False positives – transactions that are mistakenly flagged as fraud – can represent a significant portion of security and policy declines because issuers lack complete insight into transaction information. PayPal’s powerful fraud detection and carding module tools, coupled with our extensive relationships with issuers, can help you accurately make decisions on transactions and reduce security and policy declines, while also helping your sales performance.

How PayPal can help

PayPal can help you optimize every stage along the way with a unique mix of data, tools, technology, and relationships. Use our solutions to help drive authorization rates, capture lost sales, and drive revenue, while providing customers with a fast, easy, and secure checkout.

As one of the first and largest Network Token Service Providers, PayPal has already tokenized more than 200 million cards on its payments platform.18 This can provide visibility and insight across the entire payment ecosystem. We apply machine learning to our vast proprietary data set to analyze decline codes, and can provide you with hands-on analysis and expertise – all to help you:

  • Access the Right Customers: 416 million active PayPal accounts that conduct an average of 44 transactions per year.15
  • Increase Conversion: 49% of PayPal users have abandoned a purchase if PayPal wasn’t available.16
  • Improve Authorization Rates: PayPal-branded wallet authorization rates average above market.17

Beyond offering our popular digital wallets, PayPal provides end-to-end payments processing services that enable digital, mobile, and in-person payments on behalf of consumers and businesses worldwide. Through a combination of innovation and strategic partnerships, our platform helps create better ways to manage and move money, and offers choice and flexibility with modular, enterprise-grade solutions.

Want to learn more? Download and read the full Optimize Authorization Rates report.

Paypal-Optimize Authorization Rates (PDF)

Paypal-Optimize Authorization Rates (PDF)

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