Payment acceptance explained
Payment acceptability, also known as authorization rate or decline rate, describes the proportion of success in payment attempts. It’s usually shown in percentages. Payment acceptance is calculated as follows in a mathematical equation:
Payment acceptance = no payment success/no payment attempts.
This post will explain the importance of payment acceptance in the business world. Payment acceptance relates to the percentage of successful payment attempts. Optimizing payment and client sales is essential as low payment acceptance equals low revenue.
Types of payment acceptance
Three types of payment acceptance methods exist: card-based payments, direct debit, and invoicing.
- Card-based payments are the most popular type of payment globally, so your Saas company must accept credit and debit
- Direct debit is a popular payment method in Europe while invoicing is common in North
Payment acceptance via SaaS
There are several factors involved. SaaS companies usually have low payment acceptance. The payment acceptance rate is generally less than offline sales, and SaaS services are often bought online. SaaS is primarily available internationally, meaning issues with international payments could arise. Thirdly, SaaS is subscription-based, meaning customers must regularly update their account information, so monthly payments can go smoothly. This is a typical situation.
If you want to expand your payment options and reach new markets, look at PayPro Global. They offer more than 72 traditional and international payment methods in over 110 currencies worldwide.
Why is payment acceptance a useful metric?
Calculated and analyzed payment acceptance can help improve payment management. If your acceptance rates are lower, then revenue from new or potential buyers looking for your goods/services for the first time or from customers already using your services is lost. Payment acceptance segmenting is an excellent method for understanding the causes of payments failing and reducing the problem. How are payments processed? How does card payment work?
How to (meaningfully) calculate payment acceptance?
Payment acceptance can be defined simply as the percentage of successful payment attempts. Credit cards may call the authorization rate if necessary. You calculate this by removing the data from an electronic payment processor (most tools provide an option for exporting the payment data in CSVs for every failure or successful payment attempt). Moreover, you shouldn’t look at payment acceptance individually. The language has been too generic for accuracy and meaning, mainly for subscription businesses.
Challenges with payment acceptance
Wrong, missing, or expired information
Incorrect or incomplete details are the reason payments are not sent. This is a possible reason that an email to the customer is deemed unsatisfactory or inaccurate. Card validation must be used for the checkout form, so the customer has all the necessary information. This includes attributes such as length and validity of credit cards (16 characters), validity, and CVV.
You should also include graphics in your order confirmation to specify what formatting is needed.
“Card not present” transactions
Online payment is the only “cards without cards” transaction. Because a credit card is not available, fraudsters can easily use it to purchase goods or services by using the card without giving out identifying details. CNP’s acceptance of payments has been significantly slower than in a cash transaction with cards presented in person.
It can also be challenging to renew subscriptions if there’s no card or customer on the card, so they can’t respond when a decline appears on the screen. If a notification is given, later it may be used. The motivations and communications to do so are less intense.
Payment requests don’t share the same format
It’s essential to maintain good relations with your banks. Banks speak a different “language” to communicate. They often focus on standard communication standards like shipping containers, connector sizes, or W3C standards for the internet. However, we have a problem.
Standardisation cannot be spread across every banking group. There is no similar to the Internet-based banking model that the W3C has created. Thankfully, this has started to improve gradually. The financial sector is taking giant steps towards establishing a single standard for financial transactions (including payments) – ISO 20022.
Although there are bank relationships, introducing foreign currencies can always be an element of complexity.
The difficulties of cross-border payments worsen when they are traded in one currency. Trends in international financial relationships decline due to higher cost, risk, and regulatory burdens. It focuses on foreign transaction traffic to larger institutions. Banks cannot store cash in several currencies to allow exchanges. The payments chain could be longer, but the banking system has no relationship.
Genuine cross-border “foreign” transactions get quickly declined
Cross-national payments expose several problems with how bank conversations are handled. First, the cross-border transactions may be longer with different payment channels, causing errors and decreases in accuracy and variety. The bank must also maintain a correspondence account for money transfers among them. Usually, banks only keep corresponding tabs when the volume is sufficient and there are enough transactions for a correspondent account. The 2008 economic crash triggered increased regulations and led banking to become more consolidative.
Lack of funds from the payment method
There’s another primary reason for the failure of payments. Approximately 19% of failed payment attempts are due to a shortage of funds. Cards (particularly Prepaid and Credit Cards) are most commonly rejected due to credit limits. This limit can usually be lower than the actual source. Most subscription billers offer timed follow-up. Can someone take the money away from you? If you’re not getting the refund, you must make it harder.
Payment processing that delivers local experiences on a global scale
Providing your consumers with payment choices can significantly affect their experiences during the selling journey. With this system, you are allowed to pay your credit cards securely and effortlessly across the globe. All in one integrated solution.
As a Saas company, you will want to ensure that you can accept as many forms of payment as possible. This will give your customers more choices and make it easier for them to pay for your product.