Authorization rate

Why is authorization rate important?

A high authorization rate leads to more sales and, ultimately, more revenue. An optimal authorization rate also reduces instances of failed payments, helping subscription-focused brands retain more subscribers, boost customer lifetime value, and drive recurring revenue.

Conversely, a low authorization rate can increase failed payments and jumpstart a negative flywheel. Banks and payment processors rank the trustworthiness of a merchant’s transactions. A low authorization rate can lead to banks and processors treating transactions more cautiously, resulting in more declines.

Authorization rate is also one of several metrics used to gauge the overall payment health of a subscription-focused organization, along with chargebacks, refunds, and recurring revenue failures.

Authorization rate best practices

1. Implement automatic retries

Automated retry solutions are a powerful tool to increase your authorization rate. They enable you to efficiently retry failed payments caused by technical failures and missing or improper cardholder data.

Butter automatically retries declined transactions using sophisticated models based on payment transaction data. Unlike other solutions, Butter uses patented machine-learning technology to analyze transaction metadata and develop bespoke retry strategies for each category of failed payments.

2. Run transactions during local business hours

International subscription companies often make the mistake of running payment transactions during their business hours. Instead, they should run payments during the subscriber’s local business hours.

For example, imagine an international company in Seattle, Washington, selling digital subscriptions and processing payments at 2 p.m. daily. While the timing makes sense for the company, it appears suspicious in regions with significantly different time zones. In this case, 2 p.m. in Seattle is 2:30 a.m. in parts of India. Because the payment is initiated from another country in the middle of the night, there is a higher chance it will be tagged as fraudulent and fail.

3. Minimize your disputes with a dedicated solution

Disputes and chargebacks hurt your overall payment health and can trigger an increase in failed payments. Invest in a fraud monitoring tool and a dispute mitigation solution to reduce decline. Both products will help protect your authorization rate from overly cautious banks and payment processors.

Butter’s dispute solution intercepts disputes before they reach your payment processor and refunds or fights them using transaction data and merchant-tailored rules. The result is fewer chargebacks and a higher win rate.