Reports have shown that at least 2.6% of all e-commerce orders are rejected. Financial institutions processing the transactions see them as fraudulent and nip them in the bud. However, it is also known that around two-thirds of these declines are “false positive” meaning that they pose no threat to the merchants. As a result, thousands of dollars are lost every year not only in missed sales but also in wasted Marketing efforts. The truth is businesses need to employ certain techniques to stop losing this money. And today, we’re going to introduce you to some of the effective ways how to grow your transaction approval rate.
We’ve got four words for you today: cascading and smart routing.
What is cascading?
Cascading means distributing declined transactions between multiple channels to ensure a higher approval ratio. Thus, merchants along with their processing partners send transactions from a certain region to a particular channel.
Unlike a common belief that this feature helps fraudsters strive, this feature is definitely not about it. The whole idea of cascading is in identifying the “false positive” declined transactions and having them processed in the end.
To understand the nature of the transactions declined due to suspected fraud, let’s look into common reasons for declines.
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Why do transactions get declined?
First and foremost, declined transactions occur due to manual entry errors (e.g. wrong credit card number, wrong CVV code, etc). However, banks often suspect potential fraud and block the transaction altogether even if no fraud was intended. The thing is banks aim to block all the risky transactions. Therefore, they use highly-sensitive tools for detecting and preventing potential fraud, no matter how high, and block it.
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So, the solution here is either have a team of Risk Managers working 24/7 on processing the flagged transactions or integrate cascading. The latter will have the system find a channel that would let the transaction through if possible.
Thus, at Ikajo, we offer customizable cascading of card payments as a way to significantly increase conversion by taking into account both the main channel prioritization rules and dynamic transaction approval rate indicators, fraud transaction flow, etc.
Now, let’s understand what smart routing is.
What is smart routing?
Smart routing is a technology that allows a payment processor to send a transaction to the channel where it’s most likely to be approved. It is implemented by payment processors with an extensive acquiring network.
Unlike cascading, smart routing aims to prevent transaction declines instead of finding a way to approve already rejected transactions. As a result, a larger volume of transactions goes through. This grows the merchant’s conversion rate and saves tons of money in sales and marketing efforts.
It’s in the merchant’s best interest to find out whether the payment processor you’re going to collaborate with is offering Smart Routing and how extensive its acquiring network is.
Despite popular opinion, it isn’t a “cascading” synonym. Smart routing takes place before the transaction authorization while cascading is there to solve issues with the flagged transactions.
How to grow your transaction approval rate
- Find a reliable payment provider.
A reliable payment processor will choose the best-fitting acquirers for you based on the nature of your business, monthly volumes, location, target markets, etc. Later, when a customer comes to your site and makes a purchase, it will automatically analyze which acquirer is most likely to accept the transaction given the buyer’s location, card type, etc. When combined, these two factors skyrocket your transaction approval rate. - Integrate Cashier system.
Cashier technology by Ikajo International offers full-scale and highly flexible transaction routing customizable to the needs and parameters requested by the user including country of the payment card issuer, customer’s IP, transaction currency, terminal, payment system, BIN, etc.
We’ve analyzed that thanks to Cashier merchants can see an up to 20% growth in transaction approval ratio and up to 30% increase in conversion. Besides, it also offers an opportunity to process 3DS transactions via non-3DS channels in case of frozen transactions.
Summary
E-commerce merchants are losing millions in declined transactions. And it is one thing to have some missed sales for the sake of security and fraud prevention. But it hurts to know that two-thirds of declined transactions were harmless and could have brought in revenue to the merchant.
Therefore, it’s only smart to implement technologies, namely Cascading and Smart Routing, that would help identify “false positives” and let transactions go through the system.
If you’re an e-commerce merchant, these could be real life-savers. And if you need help with their implementation, we’re here to help. To get started, you can fill out an application and get a free expert consultation regarding your payment needs.
