Last editedFeb 20222 min read
Payment acceptance refers to the percentage of payments attempts that are successful. It’s an important metric for optimising payments and customer revenue because, at the end of the day, low payment acceptance equals low revenue yield. In this post we’ll go through a detailed explanation of payment acceptance and why it’s important for businesses both big and small.
Payment acceptance explained
Payment acceptance, sometimes referred to as authorisation rate or decline rate, is the proportion of successful payments to attempts. It is usually displayed as a percentage.
Expressed as a formula, payment acceptance is the following:
Payment acceptance = (no. of successful payments/no. of payment attempts) x 100
In order to calculate payment acceptance, you can usually pull data from your payment processor.
Why payment acceptance is a useful metric
Calculating and analysing payment acceptance can inform how you optimise payments in the future. If your payment acceptance rate is low, then you’re losing revenue from both prospective customers trying to purchase your goods/services for the first time and existing customers who want to continue to use your goods/services.
Segmenting payment acceptance can be a great way to understand how and why payments fail, and how you can mitigate the problem. Here are some of the ways you can do this:
Payment method - Does the payment acceptance rate change according to the payment method used? For example, are card payments generally less successful than instant bank transfers?
Billing cycle - Do decline rates increase with monthly recurring payments vs annual subscriptions or one-off payments?
Payment type - Does payment acceptance differ between online checkout payments vs subscription payments.
Customer type - Are decline rates higher in different countries or among certain demographics?
By segmenting payment acceptance in this way, you can better determine the cause of high rates and act to prevent it from occurring. With first time users, improving payment acceptance rate means you can maximise your gain of new customers. With existing users, you can prevent losing customers through what’s known as involuntary churn: the loss of customers who don’t intentionally opt out of a service, but are unable to continue to use it due to failed payments. Ultimately, optimising payment acceptance means more customers, better customer retention and larger revenue.
Payment acceptance with SaaS
SaaS (Software as a Service) companies tend to see lower payment acceptance rates. This is for several reasons. Firstly, payment acceptance for online transactions tends to be far lower than in-person purchases, and SaaS is often purchased online. Secondly, SaaS tends to be more globally available, meaning issues with international payments can crop up. Thirdly, SaaS are often subscription-based, meaning customers have to consistently have their card and bank information updated in order for monthly payments to go through. As they often don’t, this leads to frequent failed payment attempts.
Payment acceptance solutions
If you want to lower your payment acceptance rate, there are a few things you can do.
Firstly, it helps to offer payment methods that are less likely to fail. With GoCardless, you can take payments automatically from a client's bank account via Direct Debit. This makes it perfect for subscriptions, invoicing and instalments, and completely bypasses failed card payments. The service also offers recurring payment intelligence used to predict and manage payment failures. This leads to, on average, a recovery of 76% of failed payments. Payments can also be collected from customers around the world, including the UK, Eurozone countries, the USA, Canada and Australia.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.