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Are Your Authorization Rates Leaving Money On The Table?

Recently, Whitepages’ CEO Rob Eleveld spoke at the MasterCard Global Risk Leadership conference to an audience of issuers. His session, titled “The $100B Opportunity,” focused on a key issue: how to increase authorization rates.

In the name of convenience, more customers are shopping online, via apps, or over the phone where they’re unable to present a card in person. These transactions need to be closely monitored since they can provide greater opportunity for fraud. But declining legitimate transactions can result in lost revenue well beyond that authorization. For merchants, this means the customer could end up shopping elsewhere. For credit card issuers, the customer might never use that credit card again!

Because card not present (CNP) transactions require issuers to make decisions based off of very little information, CNP authorization rates are generally lower than card present authorization rates (Around 83% versus 96% in the United States, respectively.)

What if issuers could make better decisions, more quickly?

Two things would be certain:

  • A reduction in false positives and customer insults
  • Increased revenue for all parties: merchants, processors, card schemes, and issuers

According to Javelin, $118 billion of revenue is lost annually due to transactions falsely declined. We believe increasing approval rates by 200 BPS could result in a $100 billion growth opportunity in the eCommerce industry. Here’s how to do that.

Data sharing across the ecosystem is key

Because authorization rails were not built for card-not-present transactions, not much data is currently being transferred. The standard data that is transferred includes:

  • PAN (Credit Card Number)
  • CVV (in some cases)
  • Transaction Amount
  • Merchant ID
  • Merchant Category Code
  • Address

That’s all helpful, but it’s not enough detail to verify a card holder’s identity. Issuers need additional supplemental data in order to increase authorization rates. This data includes (but isn’t limited to):

  • Email
  • Phone Number
  • IP Address
  • Name
  • Customer History

As an example of how this supplemental data can help issuers make smarter decisions more quickly, let’s look at the travel industry. Evaluating a $5,000 charge on a credit card is easier when you understand that the amount is one first-class ticket (consistent with a corporate credit card holder) or four coach tickets (consistent with a family traveling on vacation).

The transaction amount, merchant, and address can’t help an issuer make that determination, but supplemental data can.

Collecting — and using — supplemental data

The industry is starting to move in the direction of collecting even more data in order to make better decisions. AssuranceIQ for Mastercard is one attempt to solve this problem. AssuranceIQ allows merchants to share data with Mastercard, and subsequently credit card issuers, before the transaction is submitted for authorization. Another is 3-D Secure (3DS) 2.0, which will be coming out later this year.

Currently, 3DS 1.0.2 introduces a lot of friction, because it typically requires the customer to complete a Verify by Visa, MasterCard SecureCode, or another challenge where the user has to enter a password to authenticate with their bank. For this reason, many merchants that use 3DS implement a risk-based authentication (RBA) approach, where they only challenge the riskiest transactions.

3DS 2.0, on the other hand, takes a ‘frictionless’ approach. By collecting more data during the authentication attempt (over one hundred fields as compared to 3DS 1.0.2’s dozen fields), including Name, Address, Phone, and Email, the issuer has more data to make a decision without challenging the consumer.

And the more data they have, the more transactions issuers will be able to approve. If, that is, the issuers adopt the new data by building it into their decisioning processes.

In fractions of a second, Whitepages Pro Identity Check, can deliver 70+ additional identity data elements and linkages to help you make authorization decisions more quickly. This helps merchants and credit card issuers validate good orders more confidently while simultaneously flagging potential risk. Get a live demo of Whitepages Pro Identity Check today from one of our payment data experts.

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