Mastercard: Credential Lifecycle Management Helps Merchants Dodge Decline Frictions

Card declines impact both merchants and consumers.

And from expired cards to lost accounts, there’s no reason for merchants to risk losing sales due to something as mundane as a card decline, often caused by nothing more than old payment credentials.

“It’s what we call credential lifecycle management,” Mastercard Senior Vice President, Payments Optimization Sumeet Bhatt told PYMNTS.

After all, in today’s era where consumers expect frictionless digital payment experiences, optimizing payment flows has become critical for merchants. Bhatt pointed out that a significant percentage of consumers — over 70% — store credentials on merchant sites, expecting uninterrupted transactions.

“It’s extremely important that these credentials are updated to provide the best user experience to the cardholders,” he said.

But all too frequently, outdated payment credentials can result in declined transactions, frustrated users and ultimately lost customers. Bhatt illustrated this with a relatable example: a streaming service subscription interrupted due to a card on file that has not been updated. Such interruptions can lead to frustration for the customer and a potential lost sale for the merchant.

To meet the moment, savvy merchants are doubling down on secure, up-to-date payment solutions to retain their edge, and their shoppers.

The ultimate goal? Fewer declines and more conversions.

In the digital economy, merchants have come to realize that a seamless payment experience is key to securing sales. A side effect of this environment is the challenge of balancing conversion rates with the reality of credit card processing limitations.

To tackle this, Bhatt said, Mastercard offers lifecycle management tools designed to streamline the update process for stored payment credentials. The company’s Secure Card on File service and Automatic Billing Updater (ABU) automate the process of updating card information when changes occur, such as a new card issuance or expiration date update.

When a new card is issued, ABU sends real-time information to merchants, ensuring they have the most current credentials on file. The system’s effectiveness is enhanced through tokenization, which replaces sensitive card details with a unique identifier or token, providing an added layer of security and boosting approval rates.

“Tokens are instrumental,” Bhatt said, “because merchants using tokenization see a 3% to 6% increase in approval rates.” This is largely due to tokens’ role in keeping payment information current, making them more reliable than traditional card-on-file data.

Mastercard’s latest tool, Authorization Optimizer, builds on these lifecycle tools by offering real-time insights into transaction retries, he said. Often, merchants attempt to retry declined transactions multiple times, which can inadvertently trigger issuer risk policies, further reducing the likelihood of approval.

“Merchants are looking to drive higher conversions,” Bhatt said. “They want every purchase to go through. And what happens is that with these excessive retries, risk policies get triggered and getting an approval becomes further and further out of reach.”

“Ninety-two percent of the declines are either due to poor lifecycle management, suspected fraud, insufficient funds, lack of funds and issuers’ risk policies,” Bhatt said.

While other retry solutions exist, Bhatt said Mastercard’s competitive edge lies in the depth and quality of its data, which helps power an advanced AI that analyzes an extensive array of variables across accounts, merchant classifications and spending patterns. The Authorization Optimizer tool alone, he said, uses over 300 different features to pinpoint the optimal time to retry a transaction.

Mastercard uses artificial intelligence (AI)-driven models that analyze various data points, including account behavior, merchant segmentation and transaction history.

These models, Bhatt said, have led to an average 18% increase in conversions for merchants adhering to the optimizer’s advice. For example, in subscription-based services, where 48% of declines are attributed to insufficient funds, such insights help merchants identify the best time to reattempt transactions, increasing the likelihood of approval without burdening the customer.

Mastercard continues to enhance its Authorization Optimizer’s capabilities by offering merchants additional insights, such as guidance on card types — e.g., non-reloadable prepaid cards or single-use cards — enabling merchants to onboard customers more smoothly. Since launching the optimization tool, Mastercard has reportedly generated over $14 billion in incremental revenue for merchants — a result, said Bhatt, of increased approvals and streamlined operations.

“We’ve seen a significant shift in converting declines to approvals,” he said.

Issuers play a crucial role in the effectiveness of enabling smoother transaction flows.

“Issuers are ultimately responsible for approving or declining transactions,” Bhatt said, “and their adherence to best practices is essential for accurate advice on declines.”

Mastercard itself has implemented initiatives encouraging issuers to use precise decline codes, rather than generic “do not honor” responses, which historically have been ambiguous. Transparency in these codes allows merchants to better understand which declines are “addressable,” meaning they can be retried with a chance of approval.

For situations where a retry is futile, such as with closed accounts, Mastercard Authorization Optimizer categorizes these as “terminal declines,” advising merchants not to retry. “We’ve established a 99% accuracy benchmark for these classifications,” Bhatt said.

This high level of precision ensures merchants do not waste time and resources on retry attempts doomed to fail, reducing unnecessary strain on the issuing processing platform and improving overall operational efficiency.

For merchants, Bhatt said, the payoff is clear: fewer declines, fewer lost sales and greater operational efficiency. For issuers, a streamlined process translates into lower processing demands and a more reliable cardholder experience. And for Mastercard, Authorization Optimizer stands as a testament to the company’s commitment to evolving its solutions to meet the needs of the modern digital economy.

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