1. Traffic Quality Clean Up
This topic sounds pretty straight forward – “you are what you eat”. Media laced with fraud or lower quality customers might be viable financially with lower media costs but there is a hidden cost that you might not be considering. If your MID has an approval rate of 70% on Wells Fargo, but a dash of fraud alerts feed into Wells Fargo’s algorithm from that small amount of lower quality traffic, the reputation of your MID for all future transactions is now tarnished and will likely not enjoy that 70% approval rate you’ve enjoyed up until that point.
Issuer algorithms are advanced and looking to be hyper sensitive to anything that looks like fraud or customer dissatisfaction. What are they looking at?
- Refund rates
- Fraud alerts
- CBs
- Decline rates
- Repeat decline attempts
- Repeat attempts for the same decline on different merchants
Identify Media Source Outliers
Card Insight will work with you to identify media source outliers. Low quality media sources will drive the issuers fraud systems mad and put a black mark on your MID reputation and just watch your decline rates jump 10-20%+
Media Source Whitelist
Over time, you’ll develop a media source white-list, watch-list and black-list. Expect your MID reputation to stay intact as you weed out media sources that are just oozing red flags that go hand in hand with approval rate degradation.
2. Best Billing Practices
There have been loads of techniques developed over the last few decades that were entirely useful in creating additional revenue; however, with the development of more sophisticated fraud detection algorithms, these techniques have nearly certainly contributed to a significant drop in approval rates.
There is a saying we live by and that is ‘declines beget declines’. We will review practices at the point of sale to reduce customer re-attempts that will ultimately hurt your MIDs reputation. Decline salvage may pick up a 5% approval rate but there will be a near-term consequence of lower approval rates on that same MID for new transactions.
If you are using Ethoca or Verifi for alerts, it will be important to explore configurations because there is a tradeoff between how issuer’s algorithms will treat your MID reputation when alerts help boost your refund rate into ranges that an issuer’s algorithm will consider problematic.
The question of whether to use 3DS in the US comes up very often. It is confirmed in our data that there are certain issuers that will decline transactions when 3DS is present, likely because the issuer doesn’t want to take on the liability of the transaction. We’ve developed a blacklist of issuers that have lower approval rates when 3DS is present when all other things are equal.
3. Portfolio Development
As fraud detection algorithms and additional changes were made to authorization by various issuers, a topic of discussion that we encounter frequently is:
Which MIDs are the “good” MIDs?
The challenge – and opportunity – that we all have is that each issuer has existing preferences for acquiring BIN, MCC codes, billing flags present / not present, 3DS, gateways…hundreds of various factors defined by each individual card issuer in a machine learning system to try and ultimately determine – from an issuer standpoint – is this individual MID one that I want to approve a transaction for from this specific cardholder?
- Accordingly, although there are certainly trends that each issuer tends to follow, the reality is that each and every MID will have its own reputation – and most likely, each MID will degrade within that preference over time due to refunds, chargebacks, or negative events associated with the industry.
- MID reputation management becomes key – the goal then is not just to improve an individual MID’s performance, load up on “good MIDs”, or to attempt some sort of gamification of an individual issuer algorithm – but to actually make sure our entire MID portfolio is balanced with the right MIDs that will improve performance on an issuer-by-issuer, reputationally sound basis. Card Insight works to solve this problem – get the most out of your current portfolio, understand where gaps may be with issuer reputation (if they exist) and find the right ways to plug those gaps as soon as possible.
4. BIN Routing Implementation
Our strategy with BIN routing is to “get it right the first time” – we want an approval on the initial transaction (Cycle 0) and for subscriptions, the first rebill (Cycle 1 attempt 1), on the first attempt, as much as possible. Salvaging declines is important for certain verticals, but an approval the first time is the right course. BIN routing is the ongoing optimization of currently available MIDs to maximize this first approval.
Happily, the improvement on approval rate on Cycle 0 and Cycle 1 Attempt 1 (C1A1, for short) DIRECTLY impacts the bottom line and revenue. Cycle 0 routing will improve conversion rate and EPCs as approval rate goes up (sometimes dramatically; in our own dataset, we recently saw a $30 decrease in CPA as approval rose 17% in one country). C1A1 routing improves both the initial subscription rebill, but also the entire subscription lifecycle by finding and sticking with the right MID and transactional pattern for the duration.
Another critically important feature of BIN routing is what we call “sustainably high approval rates”. There are plenty of “tricks” to game approval for a short time period – but the MID(s) used to do so will cap quickly, issuers will see velocity spike, and the gain is short-lived (literally an hour or day or so and then it is done). Card Insight on both a per-issuer basis and a per-MID basis employs daily cap management to avoid MID overload – literally measuring every single transaction and ensuring instructions are given to move MIDs out of rotation simply to keep velocity steady and approval rates sustainably high over the course of a day, week, and month for the portfolio and each MID.
This velocity management will help avoid disproportionate ratios throwing flags with issuers AI, acquirer issues (with too many transactions from one issuer or group of issuing BINs), and most importantly work to keep MID reputation in place as long as possible for each MID in the portfolio and reduce the amount of MID churn required to keep a portfolio in performant shape.