Online payments have become an integral part of our lives and are sure to live long. Booking a hotel room, buying a new mobile phone, or paying for groceries daily, all are backed by digital payments in India. As per Statista, the total number of online payment transactions in India crossed the mark of 43 billion in 2021, amounting to around quadrillion Indian rupees.
While the big picture of digital payments market may seem glorious, there is one aspect that no user would like to witness – payment transaction failure.
It refers to situations in which you pay or send money online but it does not reach the other end. Technical payment issues or the inability of certain payment methods to handle the surge in payment volumes often results in payment failure. In either case, the result is not favorable to any user.
Strange fact: As per the Indian payments handbook by PwC, ten out of the top 30 banks in India recorded a payment failure rate of 3% in UPI transactions in Sep 2020.
Payment success rate or transaction success rate is a metric that every business owner must know well about. Let us help you dig deeper and understand it better.
Transaction success rate – definition
Transaction success rate refers to the proportion of attempted transactions that ended with a successful payment transfer.
It is calculated by dividing the total number of approved/successful transactions by the number of attempted transactions. For example, if consumers attempted 100 transactions via a payment solution out of which 94 became successful, then the payment success rate is 94%.
Why does transaction success rate matter for your business?
Consider this scenario:
Your online shop received 100 orders of Rs. 1,000 each. Much to your surprise, the payment of only 85 orders was approved, while the rest were failed. By the simple definition, it leads to a transaction success rate of 85%. However, the situation does not end there.
The integrated payment solution had an inbuilt mechanism of re-attempting the transactions to improve the success rate. It retried for 15 failed transactions, out of which five became successful. This took the transaction success rate to 78.26% (90 successful transactions/115 total transactions attempted).
Transaction success rate matters because of its impact on your business and the overall customer experience. In the world of big data where most business decisions are data-centric, knowing about transaction success rates can help you make the right decisions.
On your side, the drop in payment success rate can be the result of:
- Technical glitches in payment gateway
- Server issues at the bank’s end
- Checkout flaws at the website or app, etc.
Whatever the reason is, you would want to make corrections in the quickest manner to avoid losing sales and loyal customers.
Transaction success rate – use cases
One of the main reasons behind fluctuations in transaction success rate is the functioning of the integrated payment gateway. In fact, success rate is one metric that differentiates one payment gateway from another. Business owners and developers look for this metric before they select a payment solution for a website or app.
Recommended Read: How to choose a payment gateway for your online business
Mainly, there are two use cases where measuring the payment success rate on your website helps in the long run.
A/B testing between multiple payment gateways
Ideally, you would want to select a payment gateway that has the highest success rate. Even otherwise, the higher the success rate is, the better. Measuring the success rate of different payment gateways to accept online payments helps you analyze which one is better than the other.
Even a slight difference can make a difference in the successful orders/payments you receive online.
Customer segmentation to direct marketing efforts
If you want to make the most of your business marketing efforts, customer segmentation is important. The best part – you can do this by measuring transaction success rate in a specific time frame.
Segments having an extremely low or 0% success rate can be eliminated upfront from your marketing efforts.
Crucial insights about transaction success rates in different industries
Payment success rate, as a quantifiable metric, is important for every business. However, it is considered differently in different industries.
Investment vs. e-commerce
For an e-commerce business, a low success rate may lead to the loss of customers. On the other hand, an investment broker knows that a potential investor will try again if the payment fails, thus giving lesser importance to the success rate.
Travel vs. online food ordering
Because of the higher intent of purchase for food, an online restaurant website witnesses a higher success rate. In case of the travel package booking portal, a user might be logged into multiple similar websites to check for deals and finally buy from any one of them.
- Success rate may vary from one business type to another.
- It also covers the intent of purchase and user cancelled cases and thus, should be considered carefully.
- It may also differ from one payment source to another.
- Payment success rate can also vary from one channel to another (website, app, offline stores, etc.)
Enable success rate improvements with Paytm Payment Gateway
A high payment success rate is the result of your informed decision to select a payment gateway. You can achieve that with Paytm Payment Gateway that stands out against the competitors for many reasons.
The seamless integration between Paytm Payment Gateway, Paytm’s banking services, and UPI has ensured industry high success rate for UPI transactions. It is also backed by its direct integration with the top six banks in India and 15 bank gateways, which reduces the transaction time and dependency on manual networks.
Simply put, you can ensure a smooth customer experience and industry-high success rate on your online shop with Paytm Payment Gateway.
If one out of two transactions fails, the success rate drops to 50%. But if ten out of 100 transactions fail, the success rate becomes 90%. Hence, it is important to consider various factors while measuring the impact of payment success rate on your business. Using a payment gateway that ensures an industry-high success rate is paramount for business growth.