Approval Rate
The approval rate is the share of payment authorisation requests that the issuer approves — 100% less the decline rate — measured by count or by value, by card type, issuer, country and channel. It is the payments metric that moves revenue most directly: a merchant losing 8% of attempts loses 8% of sales it had already made, and a provider that approves two points more than a rival is worth more than one that charges two basis points less.
- Also known as
- Authorisation rate, Acceptance rate, Auth rate
- Used at
- every merchant's and PSP's dashboard; PSP sales pitches ("we lift approval rates by X points"); orchestration routing decisions; issuer risk-team reviews
- Binding
- no — a metric; but a merchant agreement may carry service levels on it, and the schemes monitor excessive declines as a sign of card testing
- Typical levels
- 90–97% for card-present; 80–92% for e-commerce depending on market and category; lower for subscriptions (expired and replaced cards) and cross-border; a well-optimised e-commerce merchant in Europe approaches 95%
- Typical levers
- correct data in the authorisation (address, CVV, 3DS data); network tokens and account updaters for stored cards; retry logic on soft declines; SCA exemption strategy; routing to the acquirer with the best relationship with each issuer; local acquiring; sending the transaction at a time the issuer's systems are quiet
- Parties
- the merchant and its PSP (which optimise), the issuers (which decide), the schemes (whose data and tokens help), and the customers who are told "payment failed"
How the approval rate works in practice
A merchant sends 100,000 authorisation requests a month and 88,000 are approved. The 12,000 declines split into hard declines — stolen card, closed account, do not retry — and soft declines — insufficient funds, issuer timeout, suspected fraud, try again later — and the soft ones are recoverable. The merchant's payments team works the levers: it enrols stored cards in the schemes' account updater so expired cards are refreshed; it switches to network tokens, which issuers approve at higher rates; it adds retry logic that resubmits soft declines at intervals; it tunes its SCA exemption requests so the issuer approves without a challenge; and it routes US cards through a US acquirer. Approval rises to 92%: 4,000 more sales a month at no marketing cost.
The metric is where PSPs compete once price is commoditised. A provider with better issuer relationships, better data enrichment and smarter retries approves more of the same transactions, and the uplift is worth far more to the merchant than the fee difference — which is why large merchants run two PSPs and route between them on observed approval rates by issuer. Issuers, for their part, decline for their own reasons — fraud models, balance, velocity — and their approval behaviour differs by acquirer, country and data quality; a merchant cannot change the issuer but can change what the issuer sees.
For a buyer of a PSP the claimed uplift is diligence: measured how, on which merchants, against what baseline.
Example
A subscription merchant with €40m of annual renewals approves 84% on first attempt. Its PSP proposes a programme: network tokenisation (+2.5 points), account updater (+1.5), retry logic on soft declines over seven days (+3), merchant-initiated transaction flagging so renewals skip SCA (+1.5). After four months the effective approval rate — first attempt plus successful retries — is 91.5%: 7.5 points, €3m of renewals a year that were previously churned as "payment failed". The PSP charges 0.05% more than the incumbent it replaced — €20,000 — and the merchant's finance team stops comparing PSPs on price. The PSP's own sales deck quotes "+7.5 points" for a year, until a prospect with a card-present business asks for the equivalent and gets three.
Common mistakes
- Comparing PSPs on price and ignoring approval rates, which are ten times the money. - Retrying hard declines, which the schemes penalise and the issuers remember. - Measuring first-attempt approval only and missing what retries recover. - Reading a PSP's "uplift" claim without the baseline and the merchant category. - Treating declines as the customer's problem; most of them are the merchant's data.