Payment Authorisation Rates: What They Mean and How Merchants Can Improve Them

by Gropay

Introduction

For online merchants, every payment that fails at checkout represents a potential lost sale.

Yet many businesses monitor overall conversion without looking closely enough at what happens inside the payment process. A customer can reach the checkout, enter valid payment details and still fail to complete the purchase because the transaction is declined, challenged, routed incorrectly or affected by a payment provider issue.

This is where payment authorisation rates become important.

A small improvement in the percentage of legitimate transactions that are successfully authorised can have a direct impact on revenue, without requiring additional marketing spend or more website traffic.

At Gropay, we help online merchants analyse and optimise their payment setup to improve acceptance, control fraud and reduce unnecessary payment costs. In this article, we explain what payment authorisation rates mean, why transactions are declined and what merchants can do to improve payment performance.

What Is a Payment Authorisation Rate?

The payment authorisation rate is the percentage of payment transactions submitted for authorisation that are successfully approved by the card issuer or payment method provider.

A simplified calculation is:

Authorisation rate = Approved transactions ÷ Authorisation attempts × 100

For example, if 100 payment attempts are submitted and 90 are approved, the authorisation rate is 90%.

However, the headline percentage does not tell the whole story.

A merchant needs to understand:

• Which transactions are being declined?

• Which decline reasons are being returned?

• Are legitimate transactions being rejected by fraud controls?

• Are certain issuers, countries or card types performing worse?

• Is one payment provider performing differently from another?

• Are transactions being routed to the most appropriate acquirer?

• Are technical failures being counted together with genuine issuer declines?

Without this detail, an overall authorisation rate can hide significant opportunities.

Why Authorisation Rates Matter

For an online merchant, payment performance is directly connected to revenue.

If a customer reaches the checkout but their payment is not successfully authorised, the merchant may lose the sale even though the customer was willing to buy.

This makes payment optimisation different from simply reducing processing costs.

A merchant can potentially improve profitability in two ways:

1) Reduce the cost of successful transactions

This can involve negotiating better commercial terms, optimising acquiring arrangements, reviewing payment methods and improving transaction routing.

2) Increase the number of legitimate transactions that succeed

This can involve improving routing, reducing false declines, optimising authentication and selecting the right payment provider for different transaction types.

The second opportunity is sometimes overlooked because payment costs are easier to see than lost sales.

Why Are Online Payments Declined?

There is no single reason why an online payment fails.

Some declines are genuine and should remain declined. Others may represent opportunities for optimisation.

Common causes include:

Insufficient funds or available credit

The issuing bank may decline the transaction because the customer does not have sufficient available funds or credit.

There may be little that a merchant can do to change this outcome.

Fraud or risk controls

Issuers, acquirers, PSPs and merchant fraud systems all use risk controls to identify potentially fraudulent transactions.

These controls are important, but overly aggressive rules can also reject legitimate customers.

This is known as a false decline.

Authentication problems

Strong Customer Authentication and 3-D Secure can add additional steps to the payment journey.

When authentication fails, is abandoned or is incorrectly triggered, a legitimate transaction may not complete.

Incorrect payment information

Incorrect card details, expired cards, billing information or other payment-data problems can cause a transaction to fail.

Technical or processing failures

A payment can also fail because of technical problems between the merchant, gateway, PSP, acquirer, card network or issuer.

These failures should be analysed separately from genuine issuer declines.

Acquirer or routing issues

The same transaction may perform differently depending on the payment provider, acquirer or route used.

For international merchants in particular, the choice of acquiring setup can have a significant effect on payment performance.

The Difference Between a Decline and a Failed Payment

It is useful for merchants to distinguish between different types of payment failure.

A transaction may be:

• Declined by the card issuer.

• Blocked by a fraud or risk system.

• Rejected because of authentication.

• Failed because of incorrect payment information.

• Unsuccessful because of a technical problem.

• Lost because the customer abandoned the payment process.

These are different problems and should not automatically be treated in the same way.

For example, trying to increase authorisation rates by weakening fraud controls could increase fraud losses and chargebacks.

Similarly, changing the checkout design may help customer abandonment but will not necessarily solve issuer declines.

Payment optimisation starts with understanding where the problem actually occurs.

How Merchants Can Improve Authorisation Rates

1) Analyse decline reasons

The first step is to understand why transactions are failing.

Merchants should analyse payment performance by factors such as:

• Decline reason.

• Country.

• Issuing bank.

• Card type.

• Currency.

• Transaction value.

• Payment method.

• Device.

• Customer type.

• Payment provider.

• Acquirer.

• 3-D Secure outcome.

This can reveal patterns that are invisible in a single overall authorisation percentage.

2) Compare payment providers

Not all payment providers necessarily deliver the same results for every merchant or market.

Merchants should compare providers using transaction-level performance rather than looking only at headline pricing.

Relevant measures can include:

• Authorisation rate.

• Successful payment rate.

• Fraud rate.

• Chargeback rate.

• Processing costs.

• Technical failure rate.

• Settlement performance.

• Geographic performance.

A provider with a slightly higher headline fee may potentially generate better commercial results if it delivers stronger payment performance.

3) Optimise payment routing

Larger merchants may have multiple PSPs, acquirers or payment methods available.

Instead of sending every transaction through the same route, merchants can use payment routing logic to determine which provider or acquirer should process a particular transaction.

Routing decisions can consider factors such as:

• Country.

• Currency.

• Card type.

• Issuing bank.

• Transaction value.

• Historical provider performance.

• Cost.

• Risk.

The objective is not simply to find the cheapest route.

The objective is to find the route that produces the best overall commercial outcome.

4) Review local acquiring

International merchants should consider whether their acquiring structure is appropriate for the countries in which they operate.

A transaction involving a customer in one country does not necessarily perform in the same way when processed through an acquirer in another market.

Local acquiring can sometimes improve payment performance, reduce certain cross-border costs and provide better access to local payment infrastructure.

The right structure depends on the merchant’s countries, volumes, business model and provider relationships.

5) Optimise 3-D Secure

3-D Secure can play an important role in both fraud prevention and payment authentication.

However, the objective should not be to challenge every customer.

Merchants should understand when authentication is being requested, how customers are completing it and where transactions are being lost.

A well-designed authentication strategy should balance fraud prevention with customer experience and payment acceptance.

6) Review fraud rules for false declines

Fraud prevention and payment acceptance should not be treated as opposing objectives.

The goal is to identify genuine fraud while allowing legitimate customers to complete their purchases.

Merchants should therefore monitor the relationship between fraud controls and payment performance.

If a particular rule is blocking a large number of legitimate customers while preventing relatively little fraud, it may need to be reviewed.

7) Use payment method data intelligently

Customers do not all prefer the same payment method.

Depending on the market, merchants may need to support cards, digital wallets, bank-based payment methods or other local alternatives.

Offering the right payment methods can reduce customer friction and provide additional ways for customers to complete a purchase.

Payment method optimisation should therefore consider both customer preference and transaction performance.

8) Monitor performance by market

A global authorisation rate can be misleading.

A merchant might have a strong overall performance while experiencing significantly weaker results in one country or region.

Performance should therefore be reviewed by market and, where volumes justify it, by individual payment provider and acquirer.

This is particularly important when expanding internationally.

A payment setup that performs well in one market does not automatically provide the same results elsewhere.

9) Monitor performance over time

Payment performance changes.

Issuers change their risk models, fraud patterns evolve, providers experience technical incidents and customer payment preferences develop.

A payment setup that performed well last year may not remain optimal indefinitely.

Regular monitoring allows merchants to identify deterioration early rather than discovering it through a sudden fall in revenue.

10) Measure the financial impact, not just the percentage

Improving an authorisation rate from 90% to 91% sounds positive.

But the commercial significance depends on transaction volume and transaction value.

For a merchant processing a small number of low-value transactions, the impact may be limited.

For a high-volume merchant, recovering even a small percentage of legitimate transactions can represent substantial additional revenue.

The important question is therefore not simply:

“What is our authorisation rate?”

It is:

“How much legitimate revenue are we losing because of payment failures, and what would it cost to recover it?”

What Merchants Should Do Now

A practical payment optimisation exercise can start with four steps:

1. Establish the baseline

Measure current performance by:

• Payment provider.

• Acquirer.

• Country.

• Currency.

• Payment method.

• Card type.

• Decline reason.

• Transaction value.

2. Identify the largest opportunities

Look for markets, providers, decline reasons or transaction types where performance is materially different from the overall average.

3. Test changes

Potential improvements might include:

• Changing payment routing.

• Adding or changing an acquirer.

• Adjusting fraud rules.

• Optimising 3-D Secure.

• Adding local payment methods.

• Improving technical resilience.

• Changing retry or recovery logic.

Changes should be measured against both payment acceptance and fraud performance.

4. Calculate the commercial impact

Estimate the additional revenue generated by improving legitimate payment acceptance and compare this with the cost of implementing the change.

This provides a much clearer basis for deciding which payment optimisation projects are worth pursuing.

Free 15-minute payment performance check: We’ll review your current payment setup and identify potential opportunities to improve acceptance, reduce costs and manage payment risk.

How Gropay Can Help

At Gropay, we help online merchants optimise the complete payment and risk funnel.

Our work can include:

• Payment performance analysis and benchmarking.

• Authorisation-rate optimisation.

• PSP and acquirer selection.

• Payment provider negotiations.

• Payment routing and acquiring strategy.

• Fraud and chargeback optimisation.

• International payment expansion.

• Payment implementation and operational support.

We work with merchants to understand where payment performance is being lost and identify practical improvements that can increase the value generated by the existing payment setup.

The objective is not simply to process more transactions.

It is to create a payment environment in which legitimate customers can pay successfully, fraudulent transactions are controlled and payment costs remain commercially sustainable.

Contact Gropay to discuss how we can help optimise your payment performance.

FAQ

What is a good payment authorisation rate?

There is no single authorisation rate that is appropriate for every merchant.

Performance varies according to factors such as industry, geography, customer mix, payment methods, transaction value and risk profile.

Merchants should therefore benchmark their own performance over time and against comparable transaction segments rather than relying on a universal target.

What is the difference between authorisation and conversion?

Authorisation measures whether a submitted payment transaction is approved.

Conversion measures whether a customer successfully completes the purchase journey.

They are related but not identical. A customer can abandon checkout before a payment is submitted, while a payment can also be submitted and then declined.

Can improving authorisation rates increase revenue?

Potentially, yes.

If legitimate transactions that would otherwise have been declined can be successfully authorised, the merchant can recover sales without acquiring additional traffic.

The financial impact depends on transaction volume, average transaction value and the proportion of declines that can realistically be recovered.

Should merchants use multiple payment providers?

Not necessarily.

A single provider may be appropriate for some businesses. For larger or international merchants, however, multiple providers or acquirers can sometimes provide additional resilience, routing flexibility and negotiating leverage.

The appropriate structure depends on the merchant’s requirements and transaction profile.

Can fraud controls reduce authorisation rates?

Yes.

Fraud controls are designed to prevent suspicious transactions, but overly aggressive controls can also reject legitimate customers.

Merchants should therefore monitor both fraud outcomes and payment acceptance when evaluating their fraud strategy.

How can Gropay help improve payment authorisation?

Gropay can analyse payment performance, identify potential sources of lost transactions and help merchants optimise their PSP, acquiring, routing, fraud and payment-method strategy.

The goal is to improve the overall commercial performance of the payment setup rather than focusing on a single metric.