Using AI To Optimise Payments Performance and Authorisation Rates

Unlocking Higher Conversions and Authorisation Rates with AI

When it comes to accepting online payments, authorisation matters. A secure payment gateway may make it easy to accept cards, but it takes much more to maximise approvals and reduce declines. For businesses processing payments at scale, even a small increase in approval rates can mean millions in recovered revenue.

This is where artificial intelligence is changing the game. AI enables acquirers to make smarter, real-time decisions throughout the entire payment journey. From routing and retry logic to fraud prevention and transaction enrichment, AI is creating many opportunities for merchants to increase revenue through performance optimisation. 

Why Optimising Payments Matters

Most businesses accept that a percentage of transactions will fail. But not all failures are inevitable. Many result from incorrect formatting, poor data, or a lack of proper retry logic.

A transaction might be declined not because it’s fraudulent, but because of missing cardholder data or a temporarily unavailable authentication service. AI can help identify and resolve these issues automatically and in real time.

Improving performance means focusing on three key metrics:

• Authentication rate: The percentage of transactions verified as legitimately originating from the person claiming to have initiated the transaction. 
• Authorisation rate: How often the issuer approves the transaction.
• Conversion rate: The final percentage of transactions that succeed.

At Rapyd, we consistently help our partners achieve conversion rates of up to 97%, which is well above the 84% European benchmark for Mastercard.

AI in Authentication: More Approvals with Less Friction

To increase the number of successful transactions, focus on raising the rate of frictionless authentications, such as:

• Low-value exemptions for transactions under a specified amount, like €30
• Transaction Risk Analysis (TRA) exemptions for trusted, low-risk activity
• Outage exemptions when authentication systems are temporarily unavailable
• Recurring payment exemptions that use previously authenticated transactions

Include full cardholder data (name, email, billing and shipping addresses) to lower challenge rates. The goal is to keep customers moving without unnecessary friction, while still meeting regulatory and fraud prevention requirements.

Going Beyond First Attempts: Retrying with AI

Declines aren’t always final. Many are soft declines, where a small change or a second attempt could lead to approval. AI can:

• Identify the type of decline and recommend retries
• Determine optimal time intervals for retrying
• Implement retry logic based on Merchant Advice Codes (MAC)

Instead of giving up on a failed transaction, AI can adapt and try again, often with better results.

Smarter Authorisation Decisions With AI

Authorisation is where most payment decisions are made. If the issuing bank denies the transaction, it ends. But AI models can predict when and why a decline is likely, and block these transactions proactively before the issuer declines them. Why take this proactive approach?

As both a card acquirer and issuer, Rapyd has unique insights into the full transaction flow. We can harness these insights to help make more accurate predictions of when a transaction will be declined and proactively block those transactions. This helps to improve our merchants’ decline rate and standing with major card networks, it also builds trust with issuers who see more approved transactions. This combination builds trust in our merchants with card schemes and issuers, resulting in higher overall conversion rates. This proactive approach can be especially valuable for industries that see higher instances of fraud. 

Real-Time Predictions With AI Models

With the use of AI machine learning, Rapyd is developing systems that can predict with a high degree of accuracy whether a transaction will be approved or declined. These models analyse vast amounts of payment data and can:

1. Proactively block suspicious transactions
2. Implement smart retry logic to recover legitimate transactions

The Role of Data in Payment Success

Data plays a crucial role in AI-powered payments, and at Rapyd, we’re uniquely positioned to harness it for better outcomes. As both a card acquirer and issuer, Rapyd has end-to-end visibility across the transaction flow, giving us deeper control and insight into the causes of transaction declines and how 3DS rules are interpreted between the ACS and 3DS server.

This dual role allows us to evaluate the real impact of 3DS and authorisation optimisations from both sides of the transaction. With unmatched access to data, AI helps fine-tune the authorisation process, reduce friction, and improve conversion rates. 

Future-Ready Payments Systems

As payment volumes increase and regulatory demands grow more complex,  businesses need systems that can make real-time decisions, adapt to changing behaviours, handle vast amounts of data and deliver results without slowing down the checkout experience. AI systems meet all these needs. They’re designed to process and evaluate every transaction as if it’s the only one, without missing a beat.

Why It Matters for Your Business

The cost of a failed transaction goes far beyond lost revenue. It can mean a frustrated customer, a missed opportunity and long-term damage to your brand’s reputation. AI-powered optimisation helps businesses address these issues by reducing false declines and increasing legitimate approvals, enabling smoother and faster checkout experiences. It enhances customer satisfaction and retention, lowers fraud risk without adding friction and cuts costs by eliminating unnecessary retries and disputes.