You can have the best products, the smoothest ecommerce checkout, a genuine customer that’s excited to buy from you and still lose the sale. Why? Because the issuing bank said no. Every time an issuer declines a good transaction, your authorization rate falls and your revenue slips away. On the bright side, merchants have more influence here than you’d think. But before we explore things you can do to increase authorization rates, let’s explore what they are, why they’re important and what factors can hurt them.
Key Takeaways
- Protect Revenue from False Declines: Merchants lose sales when issuing banks decline legitimate transactions, a common issue that costs high-volume businesses millions annually.
- Authorization Rate Defined: It’s the percentage of transactions a bank initially approves, and an industry standard “good” rate is around 85% for online merchants.
- Key Decline Triggers: Rates suffer primarily from the higher risk of Card-Not-Present (CNP) transactions, strict cross-border rules, and banks lacking the rich customer context that merchants possess.
- Merchant Influence is Key: Merchants have influence! Authorization decisions are often improved by sending cleaner, richer data and trust signals (e.g., identity verification) to the issuer
What is a bank authorization rate?
Authorization rate measures the percentage of transactions a bank approves during initial checks before sending them to merchant review.
Why is the authorization rate important for merchants?
It’s important to keep an eye on authorization rates because they directly impact your revenue. According to Signifyd data, banks falsely decline about 15% of legitimate orders. For a merchant processing 200,000 ecommerce orders a month with an average order value of $50, that works out to:
- 30,000 good orders are wrongly declined each month.
- More than $18 million in lost sales over 12 months.
Five key factors that impact authorization rates
Authorization rates can be affected by a mix of technical, regulatory and risk-based factors. While some are outside of your control, others can be influenced if you take a proactive approach.
Card-not-present transactions
The majority of ecommerce payments worldwide are still processed as card-not-present (CNP) transactions, where neither the card nor the cardholder is physically present. Because there’s no chip to insert, card to swipe or card to tap, issuers view these payments as higher risk for fraud. To manage that risk, issuers apply stricter rules to ecommerce transactions — causing authorization rates for online orders to run about 10% lower than in-store purchases.
Fraud and risk
If you pass every transaction along to the bank without any upfront fraud screening, issuers end up shouldering the full risk. That might sound fair — it’s their job to initially authorize or decline the transaction, after all — but banks are making those calls with very limited context.
Banks only see the basics: card details, balance, amount, location and results from their basic fraud checks. They don’t see the richer signals merchants have, like behavioral patterns, order history or device details. Lacking that context, banks default to a low-risk approach to authorizing transactions. And as a result, genuine customers can be mistaken for fraudsters, leading to lower bank authorization rates and higher false declines.
Geography
Cross-border transactions expand a merchant’s reach, but they also invite more declines.
For example, a U.S. customer using a U.S.-issued credit card to shop on a German website might have their order blocked because the merchant’s country and currency don’t align with their usual spending patterns. If that same shopper is traveling in Singapore and tries to buy from a UK-based merchant, the mismatch between card country, IP and merchant location adds yet another red flag. With no insight into whether the purchase is a real or or fraudulent attempt, issuers often err on the side of caution and decline.
Regulations and compliance
Regulatory frameworks also shape how authorization decisions are made, and when they add extra friction, approval rates can be affected.
In the European Union, for example, regulations like the second Payment Services Directive (PSD2) mandate Strong Customer Authentication (SCA) for online payments. That means banks must apply additional checks, like one-time passcodes, biometric prompts or app confirmations, before authorizing a payment. While the goal is to cut down on fraud, the added requirements can hurt authorization rates. For instance, if the extra authentication step fails, times out or doesn’t arrive in time, the bank has no choice but to decline the transaction.
Transaction amount scrutiny
Big-ticket purchases almost always face more scrutiny from issuing banks. After all, a $2,000 laptop is a bigger risk than a $45 shirt. While merchants carry the cost of chargebacks if fraud slips through approval, issuers still take a conservative approach at authorization to limit fraud and dispute exposure. That caution drives down authorization rates on higher-value orders, meaning big-ticket sales are more likely to be declined by issuers.
When you add these factors up, it’s easy to see how they chip away at bank authorization rates. And that raises the question: What should your rate realistically be?
What is considered a “good” authorization rate?
A strong bank authorization rate averages around 85%. Merchants below this benchmark can improve performance by optimizing authorization systems and transaction verification processes.
How to increase authorization rates with Signifyd?
Even a small increase in authorization rates makes a tangible difference.
Take the example we used earlier: a merchant processing 200,000 online orders a month with an average order value of $50. Say they have an 85% bank authorization rate right now. If they increase that rate by just one percentage point, they’ll have 2,000 more orders authorized each month, which could translate into $1.2 million in additional revenue over 12 months.
With Signifyd’s Authorization Rate Optimization solution for merchants, those gains aren’t hypothetical. By enriching every order with cleaner data, richer context and pre-authorization screening, you give banks the confidence to increase authorization rate by up to 3% on average.
Five strategies to increase authorization rates
While you can’t control every factor behind a bank’s decision, you can take steps to influence the process. Here are five strategies that can help lift authorization rates.
1. Use step-up authentication strategically
When a bank sees a transaction as too risky, the default is to decline it. That’s one reason authorization rates suffer — especially on borderline transactions that fall into a gray area. With more context, many of those orders could have been approved when passed onto the merchant.
By using 3D Secure (3DS) strategically, you give issuers an alternative to a straight decline. Instead of sending back a “no,” the bank has the option to ask for more proof through a step-up challenge like a one-time passcode or biometric prompt. Without 3DS in place, those same orders would simply fail.
It’s important to note, however, that you need to be selective when using step-ups like 3D Secure, which can introduce friction that can reduce conversions. Not every transaction needs that extra layer, but having the rails available means you can satisfy issuer (or regulatory requirements when needed) and save more authentic sales in the process. The key is knowing when to lean on step-ups and when to use higher converting alternatives.
2. Leverage merchant-authenticated identity
As we know, when issuers don’t have enough context, they default to decline. One way to flip that decision is by running a merchant-authenticated identity check. This lets you vouch for the customer yourself, building the trust banks need to authorize more honest orders.
For example, when a shopper logs into your app with Face ID or a fingerprint scan, you know it’s the right customer. Passing that verified identity signal through shows the issuer the cardholder has been authenticated. That level of trust can tip the balance toward a fast authorization instead of decline.
3. Send better data to issuers
Authorization decisions are only as strong as the data behind them. Small gaps, like a missing field, a typo or mismatched billing and shipping addresses, can trip up an issuer’s system and trigger a “technical decline.” How? If the data they receive looks messy, incomplete or inconsistent, their automated systems are more likely to block the transaction, even when the customer is legitimate.
These decisions can be influenced by how much context the bank receives. The cleaner and more complete the data is that you provide to the issuer upfront, the more likely they are to authorize the transaction. By using a solution like Signifyd’s Authorization Rate Optimization, you can enrich each order with transactional intelligence and insights from the Signifyd Commerce Network before it reaches the issuer. This proves the purchase attempt is honest before the bank even has a chance to run their own checks.
4. Share richer context
Banks, by themselves, use weak data to make their authorization decisions. Even though they know their cardholders’ general spending patterns, when it comes to a single transaction they only see limited fields like timestamp, merchant ID and dollar amount. That narrow view can cause them to play it safe and mistakenly decline good orders.
By enriching transactions with stronger signals (like risk scores and liability acceptance), you give issuers the trust signals they’re missing. When those trust signals travel with each transaction via a payment optimization platform like Signifyd’s, banks gain the confidence to relax their fraud controls and authorize more orders, thereby increasing authorization rates.
5. Screen transactions and send cleaner traffic
Sending every order straight to the bank isn’t always the best move. When expired cards, obvious fraud or automated bot attempts get mixed in with legitimate traffic, they create noise that lowers authorization rates and racks up processing fees on transactions that were bound to be rejected.
You can leverage pre-authorization screening through Signifyd’s Authorization Rate Optimization to help cut through that clutter. By holding back fraudulent orders and sending cleaner traffic downstream, you send banks a higher percentage of genuine transactions. Over time, that consistency creates a halo effect — the safer your traffic looks, the more comfortable issuers become authorizing future CNP purchases.
FAQs
How do you calculate your authorization rate?
Divide the number of transactions the bank authorizes by the total number of attempted transactions, then multiply by 100. For example, if a bank authorizes 8,500 out of 10,000 payment attempts, the authorization rate is 85% — which is considered a good rate for online merchants.
What happens if my authorization rate is too low?
A consistently low authorization rate signals to issuers that your traffic is high risk. This can cause them to apply stricter fraud controls, leading to even more false declines, fewer approved orders and greater revenue loss over time.
How can merchants increase bank authorization rates?
Ecommerce merchants can improve authorization rates by sending cleaner, more complete order data, providing issuers with richer contex and pre-screening transactions to filter out fraud. Solutions like Signifyd’s Authorization Rate Optimization bring these strategies together, helping banks feel confident approving more good customers while still protecting against bad actors.
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Want to learn more about increasing authorization rates? Let’s talk.
