Payment acceptance rate is crucial in today's business landscape. Merchants must focus on more than just selling their products or services. They need to ensure that the payment experience they offer to their customers is frictionless, safe and efficient.
According to McKinsey's report, payments reached an all-time high revenue of US $2.2 trillion in 2023. Hence, having the right technology and payment provider can play a vital role in a merchant's success.
In this article, we'll dive into what payment acceptance is, why it’s important to stay on top of it, how to measure acceptance rate and the factors impacting it. Additionally, we’ll also explore strategies to enhance the overall transaction experience for your customers, let's get started.
What is payment acceptance rate?
A merchant's payment acceptance rate measures the percentage of approved transactions. This metric provides insights into your payment performance, allowing you to pinpoint areas for continuous improvement. A good payment acceptance rate benchmark can indicate a seamless experience and efficient payment technology from your payment service provider (PSP).
Although there is no universal benchmark for a "good" payment acceptance rate, a rule of thumb is that the higher the rate, the better. An ideal acceptance rate would vary for different businesses depending on several factors like the merchant's industry, business model, payment methods and geographic region. Having a consistently low payment acceptance rate signals that merchants need to take proactive steps to optimise their payment set-up.
How is an acceptance rate calculated?
To calculate the payment acceptance rate, take the total number of successful transactions and divide it by the total number of attempted transactions, then multiply by 100. For example, if a merchant accepts 93 out of 100 transactions, their acceptance rate is 93%. The higher a merchant's acceptance rate, the more revenue they can generate.
Factors that impact payment acceptance rates
Several factors can affect a business's payment acceptance rate, some of which may be beyond its control. However, understanding the factors that impact it, is a good starting point for solving them. Let's look at them below.
Insufficient funds
Sometimes, not having sufficient funds is a common reason a customer's transaction is getting declined by the issuer. This means that the cardholder doesn’t have an adequate account balance to cover the payment.
Incorrect card information
When the customer inputs the wrong Personal identification number (PIN) for an in-store transaction or the wrong Card verification number (CVV) for an online payment, the card issuer will decline the payment.
Risk assessment failure
Most transactions now require the customer to complete 3D Secure or another two-step authentication method to get it authorised. If the customer fails in any of these authentication steps, the transaction will be declined by the issuer to prevent the threat of fraud.
Technical glitches
Any participant in the transaction flow—from the payment service provider or payment gateway to the acquirer and issuer—can experience technical glitches that prevent payment acceptance, such as unexpected system or internet outages.
Local payment options
Not offering popular local payment methods can significantly impact your payment acceptance rate, especially for merchants operating in multiple countries. Customers prefer these payment options because they are accessible and often align with local financial habits. For example, in Brazil, PIX instant bank transfers are more popular than card payments. Understanding consumers and their preferred payment methods can help enhance your set-up and payment acceptance rate.
Checkout page design
A payment page that is not user-friendly or does not include preferred payment options could be a hassle for customers to successfully complete a purchase. For example, sticking to only necessary fields on the payment page, making payment options prominent and a clear display of error messages on the payment page can help you optimise your checkout page and payment acceptance.
Watch our video for more payment page optimisation tips:
Why is a payment acceptance rate important for businesses?
Payment acceptance is crucial as it indicates a business's payment processing efficiency. A low acceptance rate can hinder merchants from meeting their sales projections and revenue goals and can also lead to customer frustration. Therefore, understanding and optimising your payment acceptance rate is important for several reasons, such as:
Customer satisfaction
A smooth payment experience can leave a positive impression on customers, increasing their likelihood of returning for future purchases. A Bain and Company report found that a 5% increase in customer retention produces more than a 25% increase in profit. When transactions are consistently successful, customers are more likely to trust your business and have a positive overall experience.
Revenue growth
Higher payment acceptance rates lead to more successful transactions and increased profitability. Each declined transaction represents a potential loss of revenue, so improving your acceptance rate directly impacts your bottom line.
Valuable insights
Segmenting your payment acceptance based on factors such as payment methods, customer locations, or transaction types (e.g. subscriptions versus one-time purchases) can provide your business with more detailed insights. With this data, your PSP can identify the causes of declines and implement targeted strategies to address them.
How to improve the payment experience for your customers
While most businesses may not achieve 100% payment acceptance, implementing the right optimisations can significantly boost profitability and payment performance. Here are some tips for providing a seamless payment experience.
Understand target consumers
Dedicate time to getting to know your customers' buying habits and payment preferences. This knowledge can help you streamline the shopping and checkout journey. For example, you might offer preferred shipping options or maintain a secure, consistent checkout design that aligns with your brand.
Offer various payment options
Providing multiple payment methods at checkout lets customers pay how they want, reducing cart abandonment and maximising revenue. For instance, if you are targeting the European market, you should offer popular local and global payment methods like Bancontact in Belgium, PayU in Poland and the Czech Republic or SEPA Direct Debit across Europe.
Provide customer support
Based on the resources available to your business and customers preferences, you can provide one or more customer support channels. You can choose between email, phone, live chat, social media or messaging apps. Choosing the right customer support options can boost satisfaction and engagement, while keeping the cost of maintaining the support channel(s) low.
Enhance fraud detection
Work with a PSP that utilises risk and fraud management tools to minimise false declines, where legitimate and valid transactions are falsely flagged as fraud. Finding this balance is crucial—you want to prevent fraud without declining valid transactions. This approach not only safeguards your business but also builds customer trust and loyalty by ensuring their transactions are smooth and secure.
Optimise your checkout experience
Ensure your payment page is user-friendly includes clear instructions and optimised for various screens. A well-designed checkout process can significantly reduce cart abandonment and improve your acceptance rates.
Work with an experienced PSP
Improve your payment experience by working with an experienced PSP that can help you optimise your payment acceptance rates. Payment service providers can implement solutions like frictionless 3DS2 flows where suitable, optimise configurations within your payment system or offer acquiring channels to cover the regions you’re targeting with the aim to reduce the risk of failed payments.
How emerchantpay can help?
Payment acceptance is the lifeblood of businesses. A robust payment acceptance strategy will not only increase revenue but also foster customer trust and loyalty, leading to long-term success.
At emerchantpay, we optimise your payment acceptance rate for business success. As a PCI level 1 compliant PSP and acquirer with over 20 years of experience, we're uniquely positioned to help you navigate the complex world of payments.
Working closely with merchants, we determine the most suitable payment solution for their use case, including eWallets, subscriptions, Pay by link (PBL), MOTO and POS terminals they need for business growth in a digital economy.
Furthermore, our comprehensive approach includes:
- Robust risk management: Our real-time anti-fraud solutions help mitigate fraud while minimising false declines, striking the perfect balance to optimise your acceptance rate.
- Expert support: Benefit from access to a dedicated Account Manager and Risk Analyst help your business for all things payments and improving your acceptance rates.
- Global reach: Our in-house local and global acquiring services facilitate your entry into new markets, helping you maintain high acceptance rates as you expand globally.
- All-in-one solution: Our comprehensive payment solution provides you with the tools and insights needed to monitor and stay on top of the payment needs of your business.