How a leading card issuer reduced credit card declines by over 35%
The Challenge
A well-established card issuer with over 4 million cards under management wished to improve and optimize its customer experience and specifically by avoiding card declines. When a customer’s card is declined, the issuer risks losing its top-of-wallet positioning, the loyalty of its cardholders, and incurring the high operational costs involved with increased call center volumes.
The Solution
The card issuer partnered with Kipp, a real-time collaboration platform that brings card issuers and merchants together to reduce declines of legitimate credit and debit card payments. Kipp’s platform allows merchants to share real-time data and ease some of the issuer’s risk to drive increased authorization rates for issuers.
Driven by Kipp’s success working with top merchants in many industries, the issuer implemented an algorithmic model on Kipp’s platform that defines the rules and corresponding premium prices for approving transactions they would typically decline. The issuer determined its risk appetite and the costs it would need the merchant to assume for it to take on an additional level of risk.
Customer transactions about to be declined are shared with Kipp in real-time. Kipp identifies whether the transaction can nonetheless be authorized by leveraging its relationship with the merchant to receive supplementary data and a risk-sharing premium in return for accepting the risk. For example, the issuer – via Kipp – may choose to approve an over-the-limit transaction by considering the customer’s behavior and risk characteristics of the transaction.
The Results
Based on performance analytics, the collaboration with Kipp has enabled the issuer to approve, on average, over 35% of transactions that would have otherwise been declined due to insufficient funds.
Number of declined transactions saved by Kipp (%)
Retail
0
%
Entertainment
0
%
Digital Goods
(subscription)
0
%
Kipp saved a retail merchant 54.1% of transactions that were about to be declined due to insufficient funds. Similarly, an entertainment merchant saw 41.7% of their NSF declines recovered. For a digital goods subscription merchant, 26.3% of insufficient fund payments were reversed, and completed payments were made.
The entire process – sending out the over-the-limit transaction to Kipp, running Kipp’s analysis, and responding with authorization advice – took less than 200 milliseconds, making the entire process completely transparent to cardholders. The impact on the default rate, as analyzed by the issuer, was minimal and was entirely covered by the premium paid to the issuer by Kipp and its merchants.
These reduced declines allow the issuer to keep its cards “Top-of-Wallet” providing its customers with a smooth purchase experience that builds loyalty and reduces costly contact center interactions. By reducing the number of unnecessary declines and authorizing more transactions, the issuer also benefited from a significant increase in revenue across multiple merchant categories.
