Recently at Spreedly we had the opportunity to "drink our own champagne" (or eat our own dog food) as we switched from PayPal to Stripe and measured the impact on our credit card decline rates.
As our customer's know, we help online merchants and marketplaces minimize PCI compliance scope via secure credit card collection, tokenization and then routing that card for a transaction against your preferred financial partner. This could be a payment gateway or a third party API.
Storing cards in Spreedly means you can reuse a card against a different gateway provider. This ability to route a card against any end point, and to keep it and re-use it against a different payment endpoint, is a big part of our value. A common concern we hear is, "What happens to a stored card in Spreedly if I run it against more than one payment provider?" This is a reflection of the fact that no one in the industry can store a CVV code. That in turn can lead to the erroneous conclusion that a card presented without a CVV will fail.
We know that's not true, but this was a chance to put that to the test via a fairly simple experiment and track the data. Since our inception we used PayPal Websites Payment Pro for credit card processing. Despite all the PayPal horror stories, this had worked fairly well for us for a long period of time. However, one day our PayPal account stopped accepting all American Express (AMEX) cards. PayPal told us they knew about the issue and it impacted some PayPal merchants. They did not have a timeline for fixing it.
Within a couple of minutes, we opened up a Stripe account and routed all American Express cards into Stripe. Problem solved. We then learned AMEX was prompting some long time customers to verify our renewal/charge (AMEX had worked out this request was now traveling via a different route). So, we checked back with PayPal but they had still not fixed the issue. Therefore, we left Visa/MC going into PayPal and AMEX going into Stripe.
After about a month, we found out they resolved the PayPal/AMEX issue. By now, however, our finance person had spent a month looking at PayPal reporting and a month looking at Stripe reporting. Let's just say the interest around getting back to a single provider was no longer focused on PayPal. We decided to move our credit card processing to Stripe.
Most of the value we provide our customers is simple PCI compliance and the ability to work with multiple payment gateways or API's. In this case, we weren't really doing that. Rather we were just doing a static switch from one payment gateway to another.
Nevertheless, the key concept we were going to test was the same: what happens when a single stored card at Spreedly is run against two or more different financial endpoints?
Parameters - Only Visa and Mastercard cards (we had moved AMEX over earlier and didn't track). - We blended new wins and renewals together. Being a SaaS service the bulk of our monthly transactions are renewals vs first time charges. - We tracked two months prior and two months post the switch. - Our average ticket size fluctuates pretty wildly but nearly all are more than $100, some in the $1000's. - We have a pretty good blend of US and international customers - we're definitely not 100% focused on any one region so that shouldn't be a factor in our credit card decline rates. We only support one currency, ($US).
The Data Our credit card decline rates by month and provider:
As expected, there was some uptick in decline rates by switching providers. But at worst it impacted 2 - 3% of our transactions.
We didn't see a corresponding increase in churn, meaning those people who failed either updated or re-entered their card data. Interestingly, with a full month of credit card transactions cycled through, October on Stripe was the lowest month of the four for declines. We'll continue to watch that to see if that holds.
This was a simple experiment lacking the rigor of a full blown comparison. Still, our data largely backed up what we knew - switching from one payment processor to another had little material impact on our processing success rates. We saw a small blip and then settled down at the same (slightly lower) credit card decline rate.
Our recent post, Is your gateway good enough?, is worth reviewing if you want to learn more about payment gateways and credit card decline rates. If you'd like to switch gateways or use more than one payment gateway, sign up for our free development account.