Recently, Forter hosted our first Payment Roadshow event at the Microsoft office in Seattle. During the event, I had the opportunity to sit down with Stuart Dwyer, senior director of payment optimization and partnerships at Microsoft, to discuss strategies for increasing authorization rates.
Key Takeaways
Issuer Optimization: Data Sharing and Trust
Data sharing is crucial as banks require more information to make better decisions. By sharing more data, merchants can convey trust to banks, who, in turn, can make more informed fraud decisions. However, establishing technical connections with issuing banks directly can take years. Instead, merchants should leverage a partner with these connections already in place.
In addition, merchants can build trust with issuers by sending them traffic with a higher level of trust. This can be completed by moving fraud decisions to pre-authorization or by designing a MID structure around the various levels of risk associated with your transaction profile.
Smart 3DS: Intelligent Usage for Better Outcomes
Strategically applying 3DS can improve completion rates but cannot be applied uniformly as different banks have different 3DS preferences. Requiring 3DS on the wrong transactions can introduce friction for good customers and negatively impact authorization rates. Instead, merchants should consider issuer preferences and transaction risk when determining which transactions should be sent to 3DS. It’s also important to consider customer preferences in each market, as customers in different regions may be more comfortable with 3DS due to local regulations.
Card Vaulting: Balancing Security and Efficiency
In response to ecosystem breaches that exposed private cardholder data, card vaulting has gained prominence and is now a prioritized component of every major merchant’s payment architecture. Merchants should consider leveraging a vendor for card vaulting due to the high cost of maintaining PCI compliance, but the choice of which vendor needs to be made with a long-term vision of choice in mind. Merchants need to ensure they are not locked into a vendor, a specific card path, or a specific optimization feature, so selecting a vault provider that can enable that kind of strategy is critical.
Intelligent Routing: Maximizing Approval Rates and Efficiency
Intelligent routing can be a significant revenue driver as it increases payment provider redundancy, reduces costs, and optimizes approval rates. To effectively employ an intelligent routing strategy, merchants should look at continuous volume allocation modeling over time rather than simple A/B testing. Don’t get lost in Simpson’s Paradox!
What’s Coming Next? Connecting Data Across Decision Points
Looking ahead, the industry should focus on developing decision models that can better connect data points across all transaction stages to improve performance. For example, how can we leverage dispute information to impact our payment models? How can authorization and authentication data be tied closer together? As the payment landscape continues to evolve, continuous optimization and innovation remain paramount.
Payment optimization cannot be done in a day. The best payments teams in the world are the ones that are obsessed with incrementality and willing to dig deep into data to find out where the biggest opportunities lie. If you don’t have the resources (business, technology, data science, etc.) to do it yourself, looking to partner with companies willing to go that extra mile with you is more than worth it.
Want to be a part of the next Payments Roadshow? Join us in New York, San Francisco, and Chicago!
Jeff Hallenbeck currently serves as the Global Head of Payments for Forter, where he is focused on building unique payment products and partnerships on behalf of Forter customers with a goal of connecting the right data points with issuing banks to maximize approvals and eliminate fraud from the ecosystem.
