Authorization rate is frequently used as a stand-in for overall performance in the payments sector. However, as many merchants and PSPs have discovered the hard way, a high authorization rate does not guarantee a successful payment. The success rate, the quantity of transactions that are not only accepted but successfully finished and settled, is the true standard.
There is more to the difference than words. The authorization rate reflects only the issuer’s approval or decline after a transaction has passed 3D Secure and been sent for authorization. It does not capture the many transactions that fail or drop out during 3DS authentication before the issuer is even asked to approve. The complete picture, however, is conveyed by the success rate, which includes whether the customer passed 3D Secure 2.2, if the payment was successfully processed, and whether there were any mistakes or drop-offs between steps.
In summary, success is about revenue, actual payments completed and settled. Whereas authorization is about issuer intent. It only tells you whether the card issuer would have approved the transaction if it made it that far. This means transactions that fail earlier in the flow (such as during 3D Secure) aren’t counted in the authorization rate at all.
Why the Gap Exists And Keeps Growing
The gap between permission and success rates is growing, especially for companies that deal with regulated or high-friction payment flows.
One of the main reasons is the increasing use of 3D Secure 2.2, which allows for frictionless or challenge authenticationsto stop a transaction before it even gets to the issuer. A denied permission won’t appear if a customer fails a 3DS challenge or stops the flow. It just never gets that far. In these situations, your transaction authorization rate remains unaffected while your 3DS authentication and success rates suffer.
Technical errors, bad user experiences during payment capture, or settlement delays are further causes. Recurring billing attempts can also be deceptive for digital platforms and subscription businesses. An issuer may authorize a charge via 3DS, but if authorization then fails because of system latency, expiration, or insufficient funds, the transaction finally fails.
These drop-off points are overlooked when PSPs and merchants evaluate performance exclusively based on authorization rates. Inflated optimism, misdiagnosed problems, and wasted money that could have been avoided with full awareness are the outcomes.
What It Means for PSPs and PayFacs
Monitoring transaction authorization rates without success rates is equivalent to assessing shipping labels generated rather than packages delivered for PSPs and PayFacs handling large portfolios.
It’s a problem with operational performance, revenue and compliance in addition to data. Although a high transaction authorization rate can appear favorable on paper, your clients can still experience unsuccessful transactions, if your success rate, being the number of actual transactions settled, is falling behind.
It is crucial to comprehend the interactions between success rate, authorization rate, and authentication rate for:
- Providing enterprise merchants with accurate performance reports
- identifying the reasons behind unsuccessful transactions even after they have been accepted
- increasing conversion in areas subject to strict authentication regulations
- Providing more transparent insights to internal fraud, compliance, and revenue teams
Measuring what counts is the only way to stay ahead of the increasingly complicated and fragmented payment landscape.
How PayShield Closes the Visibility Gap
PayShield gives Merchant Aggregators, enterprise merchants, PayFacs and PSPs a clear view of their complete payment stack, not just the authorization metrics at the surface level.
We assist you with the following using the Transaction Risk API and 3D Secure 2.2 tools:
- Tracking the performance of transactions across the 3DS, authentication, and capture phases
- Pinpointing the points at which authorization and authentication fail – Uncover the hidden reasons why transactions are marked as “approved but not completed.”
- Give merchants clear explanations for unusual payment patterns.
Whether you want to improve reporting to high-value clients, minimize dispute exposure, or streamline your checkout process, we make sure you’re not going it alone.
Summary
The true indicator of transaction performance is the success rate, which includes not only whether a card was accepted but also whether the payment was successful and money was made.
It is operationally essential to comprehend the distinctions between authorization, authentication, and success in a multi-step transaction environment, particularly with 3D Secure and recurring billing.
Are you curious about the percentage of your “successful” transactions that actually make it to the end? Click here to speak with PayShield today. We can assist you in determining the source of your revenue loss and how to address it.
