How to Increase Transaction Success Rates for Online Merchants: By Jurijs Bordulans

Finextra

16-07-2025

In online commerce, every successful transaction counts. When a payment fails — due to fraud checks, technical issues, or user error — it can result in lost revenue and a frustrated customer who may not return. For merchants, improving transaction success rates isn't just about fixing errors behind the scenes; it's about creating a smooth, reliable experience that keeps customers coming back.
With global e-commerce sales projected to reach nearly $8 trillion by 2028 (eMarketer), merchants face losses of up to $448 billion annually from payment fraud, false declines, and abuse of returns and refunds — a growing challenge that impacts revenue and customer trust.
Data from the Baymard Institute indicates that transaction success rates range from 56% to 84%, depending on the industry and setup. On average, about 70% of online shopping carts are abandoned, leaving only 30% of transactions completed successfully. In high-risk sectors like online gaming, approval rates are often lower, typically 50–60%, due to stringent fraud controls and higher chargeback risks.
1. Why Payments Fail
Payment failures happen for all sorts of reasons — some financial, some technical, others tied to fraud checks or customer behaviour. Here are the most common ones:
Insufficient Funds
A simple one: the customer doesn't have enough money in their account. You can't control that, but you can offer other payment methods — like digital wallets or buy-now-pay-later — which might save the sale. A Kipp study found that 44.4% of online transaction declines are due to insufficient funds. This means that roughly a quarter to nearly half of all declined online transactions occur because the customer's card lacks sufficient funds.
Card Declined by the Bank
Issuing banks often decline transactions for reasons beyond insufficient funds. These can include suspected fraudulent activity, transactions in unusual locations or currencies, or bank policies that flag certain purchases as risky.
Expired or Outdated Cards
When customers use expired or replaced cards (due to loss, theft, or reissuance), the transaction fails if updated card information isn't provided. This issue is common with recurring payments and subscriptions.
Payment Provider Issues
Sometimes, the root cause of a failed transaction is technical difficulties on the payment provider's side. This can include system outages, slow response times, or errors in the integration between the merchant's platform and the payment processor, which can disrupt valid payments.
Authentication Problems
Security protocols such as 3D Secure require customers to complete additional verification steps during checkout. If these steps fail to load properly, are confusing, or the customer abandons them, the transaction will be declined or left incomplete.
Overly Aggressive Fraud Filters
Fraud detection systems designed to protect merchants can sometimes be too strict, resulting in legitimate transactions being flagged and declined. This often affects new customers, unusual purchasing patterns, or transactions from less common regions, leading to false positives.
Technical or Checkout Issues
Problems within the merchant's checkout process — such as broken buttons, missing required fields, incorrect currency settings, or lack of browser compatibility — can prevent customers from completing payments. These technical issues are often overlooked but can impact conversion rates.
Below are five essential strategies to help reduce payment failures and improve your overall transaction success rate.
2. Optimise Your Payment Gateway Setup
Your payment gateway does more than process cards — it can make or break your transaction success rate. Ensure you're using a gateway that suits your business, supports the countries you sell to, integrates smoothly with your checkout flow, and allows sufficient control to adjust settings as needed.
Rely on Multiple Acquirers
Relying on a single acquirer puts all your eggs in one basket. Using multiple acquirers lets merchants route transactions smarter — for example, sending European cards to a European bank. If one route fails, another can take over. A study by ACI Worldwide and Edgar, Dunn & Company found that 85% of merchants with multiple acquirer relationships saw increased conversion rates, with 23% reporting a rise of over 10%.
Failover Systems
If the main payment provider is down or slow, your setup should automatically switch to a backup without disrupting the customer. This keeps transactions flowing during outages.
Retries for Soft Declines
Soft declines occur due to temporary issues, such as network glitches or card spending limits. Retrying the transaction after a few seconds can often turn a failed attempt into a success, recovering sales that might be lost.
Smart Retries
Use data to determine the best time to retry failed payments, especially those declined for insufficient funds. For recurring billing, this can reduce payment failures by up to 30% through optimised retry timing and intelligent dunning strategies.
A well-configured gateway setup helps recover failed payments before the customer notices an issue.
3. Improve the Checkout Experience for Better Success Rates
Creating a seamless and user-friendly checkout experience is key to turning visitors into paying customers. According to Baymard, over 70% of mobile shoppers abandon their carts, often due to complicated or slow checkout flows. Improving the experience and functionality of your payment process can significantly reduce cart abandonment and increase successful transactions. Here are some essential elements to focus on:
Clear Checkout Flow
Make the payment process simple and straightforward. Break it down into easy steps, avoid asking for unnecessary information, and clearly show customers where they are and what to do next. This helps reduce confusion and lowers the chance of people abandoning their carts.
Real-Time Card Validation
Make sure your checkout system checks the card details as customers enter them. This means errors, such as incorrect numbers or expired dates, are flagged immediately so buyers can correct them on the spot. Setting up real-time validation reduces failed transactions from simple mistakes and helps smooth the payment process.
Multiple Payment Options
Not everyone wants to pay the same way. Offer a variety of payment methods like credit and debit cards, popular digital wallets, local payment methods, and buy-now-pay-later options. The more choices you provide, the easier it is for customers to find a method that works. According to the Digital Economy Payments report by PYMNTS, 15% of consumers use at least three or more payment methods, with at least two being non-traditional methods, such as digital wallets, cryptocurrency, or buy-now-pay-later (BNPL).
Mobile Optimisation
Many shoppers use their phones, so your checkout must work smoothly on all devices. Make sure buttons are easy to tap, pages load quickly, and the layout adapts well to smaller screens. A mobile-friendly checkout keeps customers engaged throughout the purchase process.
4. Leverage Smart Transaction Routing
One of the most effective ways to boost approval rates is smart transaction routing, which directs each payment through the path most likely to succeed. Instead of sending every transaction through a single acquirer or processor, merchants can route payments dynamically based on factors like card type (debit vs. credit), issuing bank, customer location, or the historical performance of a route. For instance, if an acquirer often declines cards from a specific country, the system can reroute those transactions elsewhere.
Modern payment orchestration platforms and advanced Payment Service Providers (PSPs) offer tools to support this logic. Many PSPs use AI and machine learning to monitor performance data in real-time, identifying which factors lead to success or failure and adjusting routing rules accordingly. This allows routing strategies to improve over time without manual intervention. For high-volume or international merchants, this setup can significantly reduce declines caused by mismatches between issuer expectations and processor behaviour.
Smart payment routing can increase approval rates by 10–15% on average. Solutions like Adaptive Acceptance leverage machine learning to optimise transaction submissions to issuers, refining message formatting and routing paths. This can recover up to 10% of falsely declined payments, unlocking billions in potential revenue for merchants.
5. Reduce False Declines with Better Fraud Prevention
False declines — when legitimate transactions are mistakenly blocked — are a growing issue for online merchants. They not only cost sales but also erode customer trust. Balancing fraud prevention with high approval rates is critical.
False declines are a costly problem, with global losses reaching $443 billion annually, far surpassing actual fraud losses. In fact, 62% of online merchants report rising false decline rates over the past two years, underscoring the need for smarter fraud prevention and approval optimisation strategies.
To reduce false declines while protecting against fraud, merchants should adopt a tailored, intelligent approach. Here are three key ways:
Customise Fraud Rules to Fit Your Business Model
Generic fraud rules may suit broad scenarios, but often fail to reflect your specific customer base. By tailoring fraud logic to your product type, transaction patterns, and user behaviour, you can filter out real threats without blocking legitimate activity. This fine-tuning is vital for industries like digital goods, travel, or subscriptions, where standard spending patterns may not apply.
Use Machine Learning–Driven Fraud Solutions
Unlike rigid, rule-based systems, modern fraud prevention tools powered by machine learning adapt to evolving customer behaviour. These systems analyse thousands of variables in real-time, making smarter decisions. Over time, they become more accurate at distinguishing legitimate from fraudulent transactions, significantly reducing false positives while securing your store.
Use 3D Secure 2.0 (3DS2) for Smarter Authentication
3D Secure 2.0, an updated payment authentication standard, supports compliance with regulations like PSD2 in Europe. When used effectively, 3DS2 reduces false declines through risk-based authentication, allowing low-risk transactions to proceed without extra steps while flagging suspicious ones for verification. This balances strong security with minimal friction, especially for mobile shoppers, who often abandon purchases if the process feels cumbersome.
6. Work Closely with Payment Partners to Improve Success Rates
Your PSP and acquirer are more than vendors — they're key partners in transaction success. Working closely with them helps identify hidden issues and implement targeted improvements to boost approval rates.
To foster strategic collaboration with payment partners and enhance approval rates, adopt a proactive approach. Here are three tips:
Conduct Regular, In-Depth Performance Reviews
Go beyond surface metrics by analysing approval rates by region, issuer, and payment method. Work with your PSP to access detailed transaction data and pinpoint issues affecting success rates.
Gain a Clear Understanding of Decline Reasons
Issuer decline codes are often vague. Collaborate with your PSP to gain context and identify patterns behind declines. This insight is crucial for addressing root causes and improving authorisation outcomes.
Collaborate on Routing and Optimisation Strategies
Use advanced PSP tools like intelligent routing, retry logic, and dynamic risk scoring. Ensure these are tailored to your business needs through ongoing optimisation with your payment partners.
A proactive, collaborative relationship with your payment partners can drive measurable gains in revenue and customer satisfaction.
Conclusion
Improving transaction success rates isn't about one big fix — it's about optimising every step, from checkout to fraud screening to backend routing. By understanding payment failures, refining your gateway setup, ensuring a seamless user experience, and leveraging smarter tools and partnerships, merchants can recover lost revenue and retain customers.