Unlocking Revenue: Global Vs. Domestic Authorization Rates

Published in

PayPro Global

5 min readFeb 7, 2024

Our world might be getting smaller, but SaaS companies can now expand across borders even faster. And it’s all thanks to the impressive technological advancements we’re witnessing in this day and age.

Selling internationally is now a logical step in any company’s expansion plan, including those selling SaaS and software, as numbers indicate (the SaaS industry has been valued at $273.55 billion in 2023).

However, successfully navigating global expansion is not as easy as it sounds and requires a strategic partnership with an expert payment solution and the careful use of local processing tools.

Without taking real steps to develop a growth plan that aligns your payment options to local customers preferences, including the most desirable payment methods and currencies, while also avoiding the pitfalls of global compliance, you might discover that your cross-border payments are getting declined.

Local acquiring is the most straightforward solution for improving international authorization rates, but unfortunately, without a trustworthy partner like the Merchant of Record, effectively processing payments locally in key markets is a highly complicated process.

In this article, we’ll be discussing:

What Are Authorization Rates?

Also known as approval rates, authorization rates measure the number of credit card payments that were successfully processed. In other words, the sale went through.

When your authorization rates are high, it means that your shoppers are experiencing a positive purchasing experience and you are enjoying increased revenue. On the other hand, if your approval ratio is low, your SaaS business is losing revenue as a result of failed transactions. And customers are not receiving the product they are trying to purchase and are left feeling frustrated.

How To Calculate Authorization Rates?

To determine your authorization rates, you need to divide the count of completed transactions by the total number of payments or attempts.

Why Do Authorization Rates Matter?

What is the ultimate goal for all businesses, SaaS or any other model?

To make a profit, of course.

But in a world marked by low authorization rates, this goal becomes less and less feasible.

Instead of making money, you are losing it. Plain and simple.

And let’s not forget that you spend money and effort on marketing to get the customer to buy, and he is blocked at the end of the funnel.

There are ways you can improve your payment process, and it is highly recommended that you do so. However, the painful truth is that some falsely declined shoppers will choose to drop your services after a single faulty experience. Yes, according to a recent study, 33% of US shoppers say they would switch products in the event of a payment decline.

So, really, you need to go beyond fixing issues and also focus on preventing them. And the only way you can do that is by keeping a close eye on your authorization rates.

Plus, it’s not just about losing revenue.

Say your SaaS business is currently making $10 million in annual revenue. Imagine having a 5% authorization rate improvement. This would translate into half a million dollars in additional revenue gained.

Higher authorization rates matter because they directly impact business profitability and customer satisfaction.

Global Vs. Domestic Authorization Rates

It’s important to consider where you are selling, domestically or internationally, because the complexity of the process depends on it.

It’s important to realize that processing a local card issued by a bank with the same location as the merchant account differs from that of an international card in terms of fees and compliance regulations associated with cross-border payments, as well as other important aspects.

Payment Processing Complexity

Without any need to comply with foreign compliance laws and regulations, eliminating the need for currency conversion and, therefore, lack of additional fees, plus facing reduced scrutiny from financial institutions, processing local credit and debit cards does not involve an increased level of complexity.

On the other hand, processing international transactions requires increased communication with foreign banks, adding a layer of complexity to the already complicated procedure and exposing the SaaS business to a series of additional operations where things can go wrong for the transaction in question.

Currency Conversion

While domestic transactions are not subject to currency conversion because both the SaaS business and cardholder use the same currency, processing international cards is a horse of a different color.

In global transactions, currency conversion is required, which exposes both the merchant and the shopper to costly exchange rate fluctuations.

Regulatory Compliance

Both domestic and global transactions are subject to regulatory compliance. However, in the case of domestic payments, both the SaaS business and the customers follow the same legal frameworks, making the process considerably more streamlined.

International transactions, however, must abide by different foreign regulations specific to the areas in which the online businesses choose to expand. Tax laws, data protection regulations, anti-laundry rules, and so on vary from country to country, making compliance management highly complex.

Fraud Risks

Unlike domestic payments, which are generally perceived as having a lower likelihood of fraudulent transactions, international ones are often seen as having a higher potential for fraudulent activity.

For instance, countries like France or the US are extremely vigilant with cross-border payments for exactly this reason.

As a result, additional security measures are often implemented by both businesses and card issuers, which then affects the payment authorization rate.

Take 3DS, for instance, a solid solution for lowering the fraud rate. However, it can affect your approval rate. So, the key is finding the right balance.

The bottom line is this:

With an estimated $250 trillion gained from all cross-border payments by 2027 (yes, trillion!), it is crucial to grasp the distinctions between processing local and international cards in order to implement the right strategies that would allow your business to expand and thrive in any territory.