A leading card issuer, already using shadow limits, faced mounting competition to keep its card as the preferred top-of-wallet payment option. Despite leveraging shadow limits, too many transactions were still being declined due to perceived risk, jeopardizing customer satisfaction and loyalty.

In a competitive landscape where every transaction counts, high decline rates not only frustrated customers but also pushed them toward rival issuers. To secure its position as the go-to payment choice and retain customer loyalty, the issuer needed a more effective, risk-sharing approach.

The bank’s Head of Cards knew reducing declines was key to staying top-of-wallet, but convincing the Credit Risk team was a challenge. They worried about financial exposure and whether the model could scale. The approach they took was conservative, only allowing certain cardholder segments to go very slightly over the limit. Over time, as the Cards team was able to show no rise in defaults, did they start to open up to more segments.

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.‬

1. Revenue Loss

A declined transaction wasn’t just one missed sale – it often meant losing a customer entirely. CIT based merchants can’t retry payments, making each failed transaction a direct hit to revenue and retention.

2. Customer Frustration

Customers expect a seamless checkout experience. When a payment is declined, they often perceive it as a merchant issue rather than a banking problem, leading to frustration, abandoned purchases, and lower return rates.

1. Revenue Loss

Declined payments meant lost revenue and abandoned bookings. Travelers who switched platforms often never returned, and more critically, they were likely to book their entire trip – flights, hotels, and car rentals – with the competitor. This not only led to immediate losses but also impacted customer lifetime value (LTV) and a frustrated marketing team.

2. Erosion of Customer Trust

High-value travelers expect seamless transactions. Payment failures led to frustration, weakened brand loyalty, and increased customer churn as travelers sought more reliable platforms.

3. High Cost & Inefficiency of Third-Party Retries

Relying on third-party retry services came at a high cost – fees piled up, often without a successful recovery. While designed to help recover failed payments, these solutions introduced additional complexities and inconsistent results, making cost management a continuous challenge for merchants.

1. Revenue Loss

Every declined payment meant immediate lost revenue, but the real cost ran deeper. For a subscription-based merchant, a single failed transaction didn’t just mean losing one payment – it meant losing months of future recurring revenue and an impact on their churn % – a KPI closely tracked by the company’s investors.

2. Customer Frustration

Customers expected uninterrupted service, yet NSF declines often disrupted their experience without warning. They often don’t see this as a banking issue and instead blame the merchant. As a result, support teams faced a growing number of complaints from frustrated subscribers who expected an immediate resolution

3. Erosion of Trust and Loyalty

Failed payments don’t just lead to immediate cancellations – they weaken the long-term relationship between the merchant and the customer. Even subscribers who intend to stay may cancel out of frustration, questioning the reliability of the service. Over time, these repeated declines erode trust, making customers more likely to explore alternatives and reducing overall lifetime value.