Introduction: Why Your Payment Approval Rate Deserves Attention
Your payment approval rate is one of the most critical drivers of recurring revenue because it tells you how many payments have successfully gone through. If a customer’s transaction isn’t approved by their bank and
the payment fails, it directly impacts how much you earn, how long the customer sticks around, and how seamless your subscription
experience feels.
However, most companies only focus on what happens after a payment is declined—customer outreach, recovery campaigns, or even trying to win the customer back once they’ve churned. But by then, the damage
is already done. A proactive strategy means preventing failed payments from happening in the first place.
In this playbook, we’ll show you how to move beyond reactive recovery and toward a prevention-first strategy — one that increases successful payments, reduces churn, and boosts customer lifetime value. If you’re
ready to unlock meaningful growth without overhauling your billing system, success starts here.
What Approval Rates Really Mean for Your Business
In the payments industry, approval rate refers to the percentage of payment transactions that are successfully authorized by the card issuer (usually a bank) when a customer tries to make a purchase. It’s a direct measure of how many customer payments go through on the first try. Whenever a customer submits a credit or debit card payment, the transaction goes through an authorization process where the issuing bank checks for things like:
• Is the card valid and not expired?
• Is there enough credit or funds available?
• Is the transaction consistent with the cardholder’s typical behavior (fraud check)?
• Does it meet compliance and risk rules?
If the issuer approves the transaction, it goes through. If not, it’s declined.
For example, if you attempt 1,000 transactions and 900 are approved, your approval rate is 90%.
Why Approval Rate Matters
• Revenue Impact: Higher approval rates mean more successful payments and subscription renewals.
• Customer Experience: Declined payments cause friction and frustration at checkout.
• Retention: For subscription businesses, failed recurring payments (often called involuntary churn) are a major threat to customer lifetime value.
Why Good Customers Get Declined
Even if a customer has a good payment history and plenty of available credit, a valid credit card can still be declined — especially for subscription or recurring payments. Here’s why that happens:
1. Card-Not-Present (CNP) transactions are riskier
When a card is used online or for recurring billing without being physically present, it’s considered a Card-Not-Present (CNP) transaction. These carry a higher risk of fraud than in-store purchases because:
• There’s no chip or tap to validate the card.
• Identity verification relies on data (like CVV or billing address) that can be
stolen.
Because of this added risk, banks and issuers use much more sensitive fraud filters for CNP transactions — especially if:
• The merchant is new or unfamiliar.
• The billing descriptor is unclear.
• The transaction happens in a different country or at an odd time.
Even a “good” cardholder can get flagged if the payment appears even slightly unusual.
2. Overly aggressive fraud detection by issuers
Banks and card issuers use sophisticated machine learning models to detect fraud in real-time. These systems evaluate thousands of signals in milliseconds — and sometimes they’re too cautious.
A legitimate transaction might be declined if it:
• Deviates from the customer’s typical purchase pattern.
• Looks similar to a known fraud trend (e.g. rapid-fire charges).
• Comes from a merchant category (MCC) that’s prone to fraud.
3. Outdated card data or card lifecycle issues
Cards expire, get reissued, or are updated by banks — often without the customer notifying the merchant. If your system doesn’t use an account updater service or doesn’t have tokenization in place, the next payment attempt might fail, even if the cardholder is in good standing.
4. Incomplete or mismatched transaction data
Sometimes, a small error in the data you send to the processor can cause a decline:
• Address doesn’t match billing info on file
• Name formatting issues
• Missing CVV code
• Incorrect merchant category code (MCC)
These might seem like technicalities, but issuers use them as risk signals.
5. Retry timing and velocity
If a payment fails and your system retries it too soon or too often,
issuers might automatically block future attempts. Some merchants
unknowingly create “decline loops” by retrying with fixed logic that
doesn’t adapt to the specific decline reason or card issuer behavior.
