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In the digital age, card declines pose a significant challenge for online transactions. While physical transactions see declines of just under 5%, online transactions face a much higher rate of around 20%. This disparity is largely due to risk factors and authentication issues.
Understanding the Card Payment Flow
Whenever you enter a card on your favourite website, payment gateways like Cashfree Payments, PayU, and Razorpay process the payment, and you see a message stating, “Your order has been successfully placed.”
Payment gateways process this request using processors like Cybersource, MPGS, and Lyra. Processors communicate with networks (MasterCard/Visa) that connect to your issuing bank (the bank that issued the card) to complete the payment.
Authentication: The customer verifies their identity, often through an OTP (one-time password). Failures can occur if the user is not redirected to the bank’s page, does not enter the OTP, or due to bank-related issues.
Authorisation: The payment gateway instructs the processor to deduct funds from the card. Failures can happen due to invalid CVV, blocked cards, insufficient balance, or online payments being disabled.
Dynamic Routing for Success
Once the payment request hits Cashfree, we internally route it to the best-performing processor at any point in time. Our systems employ complex dynamic routing algorithms to route to the best-performing processor to ensure higher success rates for the merchant.
Transaction success rate (SR) is the percentage of attempted payments that are successfully completed. The higher the SR, the more incremental GMV for the business.
Optimizing for higher Success Rates for a large food delivery business
The Challenge: Inconsistent Success Rates Across Processors
While reviewing payment performance for one of our large food delivery clients, we noticed something interesting—success rates (SR) varied significantly between different processors, even though the transaction volumes were similar.
This isn’t unusual. Success rates can fluctuate due to multiple factors:
- How processors interact with card networks like Mastercard and Visa
- Retry logic in case of failures
- Risk rules applied by the processor’s partner bank
But this observation gave us a clue that there was room for optimisation.
The Insight: Authentication Was the Bottleneck
When we looked further into the data, we found that the success rates on Processor 2 were lower because of higher authentication failures. The rest of the failures due to authorisation issues such as general decline, insufficient funds, or online payment not being enabled remained the same across both processors.
So, Processor 1 was clearly the stronger player in handling authentication, which directly impacted the overall success rate.
This happens because of the way the processors interact with networks, retry strategy, and much more on the implementation.
The Trade-Off: Better SR vs. Higher Cost
Here’s where the complexity kicked in:
Processor 1, while delivering a better SR, also came with higher processing costs.
And those costs are tied to the authorisation step—not authentication.
This opened up a key question:
Can we use the strengths of both processors without incurring extra costs?
The Solution: Decoupling Authentication and Authorization
To address this challenge, we implemented a new approach: decoupling the authentication and authorisation processes.
We worked with the processors to launch decoupled authentication and authorisation flows.
By leveraging Processor 1 for authentication and Processor 2 for authorisation, we achieved higher authentication rates and lower processing costs.
The Results: A Win for the Merchant
Once implemented, this strategy led to a 2% increase in success rate on Processor 2.
That uplift had a direct impact on the merchant’s revenue.
For a business that processes high volumes daily, even a 1–2% improvement in SR can translate to substantial gains in GMV and customer satisfaction.
Smarter Payment Flows Lead to Higher Revenue
In a competitive online environment, every successful transaction counts. As this case shows, even a small lift in success rates—powered by the right routing strategy and processor optimisation—can unlock significant revenue gains.
At Cashfree, we believe great payments aren’t just fast—they’re smart.
If you’re looking to reduce card declines, boost success rates, and grow revenue without adding cost, we’re ready to help. Let’s make every customer attempt count.
