The Digital Dilemma: Improving authorizations in a digital ecosystem

Written by North America Gateway lead, Damla Taskin

Shopping habits have changed over the past two years. As a society we’ve blurred the lines between digital and in-person with many consumers touching multiple devices before completing a purchase either in-store, online, via mobile or curbside.???

As the ecosystem evolves with this pace of growth, some of the main questions at payment events like the upcoming Money20/20 in Vegas are: How are your payments keeping up with digital transformation? Are you making the most of innovative technology, protecting your customers from new threats? And most importantly, in this digital first world, how can we improve (card-not-present) CNP approval rates without increasing fraud or adding consumer friction at the point of cart abandonment?

These questions continue to be top of mind for many merchants as they consider expanding their global footprint.

As the world grows smaller through digital connections, how can they ensure their payments strategy welcomes customers and puts their issuing banks at ease that the transaction is legitimate.?

Growing pains

CNP transactions grew by 23% according to a 2021 study by PULSE and now account for one-third of debit transactions in the U.S. As that number continues to grow, even more importance is going to placed on maximizing your CNP approval rates.

False declines are a negative experience for consumers and cost the merchant lost revenue and potential customer loyalty. As Mastercard we’re here to help you optimize your approval rates through innovative services and connections to local partners.

How to reduce issuer declines

While most digital merchants have access to a wealth of information about the customer history and the transaction, what gets passed on to the issuer at the moment of authorization remains limited, leaving the issuer to make a decision without having a broader context – which can result in false declines for genuine consumers. The key to combatting false declines lays with data and the rich insights that merchants have access to. It’s this data shared upfront that helps remove fraud on the backend as well as false declines.

Use network tokenization to optimize rates

Network tokenization, now top of mind for most merchants, takes a customer’s card details and allows merchants to digitally replace PANs with tokens unique to both the merchant and their customers. These tokens are stored remotely to solve two major pain points;

1. Real time lifecycle management to keep credentials on file up to date: Minimizing avoidable declines
2. Increased visibility to allow improved authorization decisioning by card issuers: Issuers have improved awareness of cardholders actions and history with merchant, when credentials in a transaction come through network tokenization, which can their improve decisioning

Connect to Digital Transaction Insights

Mastercard’s Digital Transaction Insights service allows merchants to send real time digital transaction insights to issuers in authorization leveraging the 3DS 2.0 protocol. These insights allow the issuer to enhance their decisioning engines helping boost approval rates and lowering false declines. The service was designed to help merchants influence an issuer’s decision mitigating the risk of transaction latency or cardholder friction.

Streamline to local acquirers

Gateways are central to the payments experience as they touch all aspects of the payment process. While each above strategy is helpful in optimizing approval rates, connecting with a payment gateway partner that has local acquirer connections across the globe can be one of the most successful and impactful optimization strategies.

The logic is simple: by using a local acquirer, issuers in the country will view the transaction as native and not cross-border. This small geography change enables more data to be shared on the customer and merchant and can thus improve your CNP approval rates.

Consider local payment methods

As important as approval rates are, getting consumers to the last step in payments can be challenging, especially for merchants entering new markets. Those looking to improve their conversion uplift can also consider local and alternative payment methods (APMs). In a recent study from our APM partner, PPRO, they found 20% of consumers will abandon their purchase if their preferred payment method isn’t an option. This is a huge opportunity for merchants considering 77% of global online purchases are not made with an international credit card, but with a local payment method.

For a world that’s quickly evolving to digital first, it’s important you have a payment partner prepared to support your company goals. With Mastercard Payment Gateway Services, we’re able to connect our partners to not only +200 acquirers across the globe but also the full suite of innovative products including Network tokens, Mastercard’s Digital Transaction Insights and over 30 local and alternative payment methods.?