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imrizwankhan
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Achieving Better Approval Rates for Your Recurring Payments


It is no secret that the subscription-based business model has surged in popularity during and post pandemic. This phenomenon has established steady cash flow from recurring revenue streams as the most desirable form of business income.

Yet, despite its understandable mass appeal, many subscription-based businesses struggle to maintain consistent revenue streams due to high decline rates associated with recurring payments.

The health of your approval rating for recurring payments can make or break your subscription enterprise. Low approval rates eat away at your revenue growth potential in the form of fraud and chargeback fees, revenue leaks and involuntary churn associated with failed payments.

Fortunately, you are not helpless in the face of poor approval ratings. There are many proactive measures you can take to push the odds of payment success in your favour.

In this blog post, we will explore several strategies that can help improve your approval rates for recurring payments and ensure your business remains on the path to success.

The Reasons Behind Payment Declines


Before diving into the strategies to suppress payment declines, let’s take a quick look at some the reasons behind payment failures. Once we understand the root causes of the problem, we can tackle it more effectively.

The following are some of the most common causes behind payment declines:

  • Outdated or inaccurate payment details,

  • Insufficient availability of funds,

  • The card issuer’s fraud and risk mitigation tools

  • The processor’s fraud and risk mitigation tools,

  • Recurring charges mistaken for suspicious activity,

  • Payment gateway and processor errors,

  • Network instability etc.


Key Strategies to Improve Payment Approval Rates


1. Automating Card Updating Processes

Outdated records, including expired credit/debit cards, are one of the leading causes of recurring payment failure. Taking steps to ensure that your customers’ billing information and payment details are accurate and up to date can prevent payment failures caused by expired credit cards.

A well-known and highly effective strategy to solve the issue of expired cards is to automate card updating processes through Account Updater or an alternative solution in regions such as Latin America where Account Updater is not currently available.

Additionally, automated pre-dunning can also help prevent payment failure by automatically reaching out to customers to update their payment details when their card is approaching expiration. This can be implemented through subscription management software and saves you from the much more abrasive dunning strategies needed to recover failed payments.

2. Tagging Recurring Payments

Recurrent charges on a card can sometimes be mistaken for fraudulent activity and are, consequently, declined by the card issuers. Simply tagging these transactions as recurring makes it less likely for security features to mistake them for fraud in the future.

This simply entails supplying relevant data at the time of authorization which ensures that every time the payment method is charged, it will be recognized as a recurring transaction and won’t be erroneously declined.

3. Treating Cardholders Fairly to Limit Chargebacks

Despite the inevitability of chargebacks, from a processor perspective, it is important to keep them contained under 1%. This is because a chargeback will not just signal lost revenue, alongside associated chargeback fees, but will also negatively impact your approval rate in the future.

A powerful way to suppress chargebacks and protect your approval rating is to treat customers fairly. Transparency is key to building trust with customers and preventing chargebacks.

Make sure that your terms and conditions are clear and easy to understand. Provide customers with clear information about the recurring payment schedule, amount, and frequency. Clear and timely invoices, renewal notices and clear cancellation options all contribute towards controlling chargebacks and their detrimental influence on your approval ratings.

4. Controlling Fraudulent Activity

Working with your payment processor to avoid fraud is critical to maintaining a healthy approval rating. You must fine-tune your strategies around payment influencers such as CVV, AVS and 3DS checks to optimize your payment processing workflows.

For example, it is generally considered a best practice to collect a CVV (Card Verification Value) during the initial order. However, CVVs cannot be stored and are not used for recurring transactions.

According to John Sullivan, Senior Payments Director at Optimized Payments, card networks like VISA and Mastercard initiate the first transactions as CIT (card-initiated transactions). When the issuer approves the transaction, an MIT (Merchant Initiated Transaction) network token is generated, which can be stored unlike the CVV. Using this token for recurring transactions improves your ability to charge the card for subsequent payments.

The approval rates for recurring transactions are highly influenced by the transaction history, so any changes in your payments flow can have a dramatic impact on approvals. For instance, simply changing your payment processor could drop your approval rating from 90% to 40%. Therefore, any changes in processors should be carefully planned alongside a contingency plan.

5. Gaining Insights from Big Data

Evaluating big data from the payments space can have a huge influence on your approval rating and help you orchestrate an optimized payments workflow. It helps you gain valuable insights into any friction within your payment processing system that may be causing a higher decline rate for your transactions.

It also allows you to assess your performance with card issuers and compare it to your peers. You can then collaborate with card networks to mitigate decline risks and boost your approvals.

6. Network Tokens and PANs

During the payment processing through cards, both network tokens and Primary Account Numbers (PANs) are utilized. A PAN is a 16-digit number printed on the front of a credit or debit card, serving as an identifier for the associated account. When a customer initiates a purchase, the PAN is transmitted to the payment processor, which authorizes the transaction and directs it to the appropriate bank for approval.

On the other hand, a network token is a unique digital identifier that can be used as a substitute for the PAN in specific payment scenarios. Generated by the card network (e.g., Visa or Mastercard), network tokens are linked to the PAN but are limited to certain transactions and merchants. This feature enhances their security compared to PANs.

Generally, network tokens have a higher success rate due to their enhanced security measures. By transitioning from PANs to tokens, you can anticipate a notable improvement in payment success rates. However, it is important to note that at the BIN level, many banks still prefer PANs, and some payment retry strategies may not be compatible with network tokens. This is why experts recommend retaining PANs and devising an internal strategy tailored to your business needs, driven by data analysis.

7. International vs Local Acquiring Options

The importance of local acquiring isaasn the subscription economy cannot be overstated.

Alberto Bentancur, Senior Account Manager Lead at dLocal reports that 63% in emerging markets are unbanked and 90% have no access to international credit cards. This is where the following payment methods become important to tap into emerging markets such as Latin America:

  • Cash Payments

  • Bank Transfers

  • Digital Wallets

  • Mobile payments


Region-specific payment methods and local acquiring relationships offer a greater success rate as international transactions often come under more scrutiny by issuers. Generally, conversion rates are reported to increase by 19% when you shift from an international to a local acquirer.

8. Dynamic Currency Conversion (DCC)

Allowing customers to pay in their local currency, even if it is different from the business's default currency, can be a major factor in improving approval rates for recurring payments. Dynamic Currency Conversion (DCC) is a process that enables merchants to present prices and accept payments in local currencies. It is important to factor this in when choosing a payment gateway provider for your recurring payments.

By using DCC, you can provide your international customers with a more personalized payment experience. They can see exactly how much they will be charged without having to convert currencies themselves or guess at what the exchange rate might be.

Additionally, DCC helps to reduce the likelihood of chargebacks by eliminating any confusion caused by fluctuating exchange rates. Customers can see the exact amount they will be charged in their own currency before confirming the payment.

9. Leverage Machine Learning Algorithms

Machine learning algorithms can be used to predict payment failures and proactively address them before they occur. By analyzing past transaction data and identifying patterns, machine learning models can accurately forecast which recurring payments are likely to fail.

This approach not only reduces the likelihood of payment failures but also helps businesses save time and resources by targeting the most at-risk transactions. Leveraging predictive analytics, businesses can achieve better approval rates for their recurring payments, reduce churn, and increase revenue growth.

Final Words


In summary, improving approval rates for recurring payments requires a comprehensive approach that combines data analysis, technological advancements, and customer-centric strategies. By continuously optimizing and adapting payment processes, businesses can unlock their full growth potential and drive growth in the competitive subscription economy.