The hidden cost of payment failures (and why it’s more than you think)

Every failed transaction is a silent revenue leak that compounds over time. For a customer, it means frustration and friction. For a merchant, it means lost revenue – and often a lost customer for good. The numbers are sombring:

• 40% of customers won’t return after their card is declined.

• 52% will abandon a checkout that takes longer than two minutes.

• $51B is the estimated cost of online payment fraud in 2024, rising 11% year over year.

• And 78% of merchants fail to recover fraud losses altogether.

Payment failures aren’t just inefficiencies, they’re a persistent drag on growth and customer lifetime value. For merchants processing millions of dollars in payments every month, even a 0.5% uplift in approval rates can translate into millions of dollars in recovered revenue. That’s growth that’s too valuable to leave on the table.Yet, payment optimization is still often treated as a backend task, not a frontline growth lever.

The cost of friction

Most payments happen in moments when timing is everything: a flash sale, a travel booking, a subscription renewal. In these high-intent, impulse-driven moments, friction isn’t just inconvenient, it’s costly. If checkout feels slow or fails entirely, customers churn, and the trust loss compounds over time.

In competitive markets, checkout experiences aren’t just a conversion issue, they’re a brand and retention issue that can make or break lifetime value. 

Why businesses overlook payment failures

Many merchants still see payment failures as an inevitable cost of doing business. But that’s no longer true.

Here’s what gets in the way:

• Complexity barrier: Multiple acquirers, issuer preferences, routing rules, and evolving fraud techniques make it hard to measure (let alone act on) optimization insights.

• Rigid legacy PSPs: Static, rules-based systems can’t adapt to real-time conditions, leaving performance on the table.

• Lack of visibility: Merchants often can’t pinpoint why transactions fail, making meaningful improvements difficult.

• Legacy thinking: Optimization is still viewed as a backend function or a “nice-to-have,” rather than a core performance driver and competitive advantage.

Without a connected, adaptive approach, optimization becomes fragmented and costly.

The three levers of payment performance

Improving performance means balancing three interconnected levers:

1. Conversion: Winning approvals while reducing false declines.

2. Cost: Managing fees and overhead without unnecessary friction.

3. Fraud: Blocking fraud precisely, without rejecting good customers.

Optimizing these in isolation doesn’t work. The real challenge is balancing conversion, cost, and fraud together — in real time, and at scale.

Payment optimization as the new growth lever

Merchants have spent years perfecting acquisition strategies. But bringing customers to the door means little if payments fail at the final step. And the stakes are rising:

• Cross-border growth makes payment flows more complex, with higher risks of decline.

• Regulatory mandates like PSD2 and SCA demand adaptive authentication.

• Competition is fierce, and margins are tighter than ever.

The rise of AI-led payment optimization is transforming what’s possible. Real-time decisioning, adaptive routing, and intelligent authentication now enable merchants to respond instantly to issuer preferences, fraud patterns, and network conditions. What used to take manual tuning or weeks of analysis can now happen automatically, at the moment of transaction.

This new generation of infrastructure turns optimization from a maintenance task into a strategic growth capability, driving higher approval rates, lower costs, and better fraud precision simultaneously.

Growth isn’t just about filling the funnel anymore. It’s about ensuring that customers complete their transactions smoothly, securely, and at scale. Every month you delay optimization is revenue you won’t get back.

A smarter approach: Optimize 360

Airwallex Optimize 360 turns payment optimization into a real-time, AI-powered growth engine. Unlike traditional PSPs, Optimize 360 is embedded directly into the acquiring stack, giving merchants tighter control and adaptive intelligence across every transaction. It’s

• AI-led and adaptive: Learns from live transaction data and issuer responses in real time to continuously refine retries, routing, token usage, and authentication.

• Global + local: Local acquiring in 35+ markets, routing payments through the best local rails to improve approval rates and reduce costs.

• Integrated: Fraud, routing, retries, and tokenization work together in one vertically integrated stack eliminating silos and missed opportunities.

This enables merchants to stay ahead of issuer preferences, regulatory shifts, and emerging fraud threats – all without constant reconfiguration. 

To see how AI-led, real-time optimization works in practice, check out our deep dive on payment optimization →

Payments as a growth strategy

Payment failures aren’t just a backend issue, they're a growth opportunity in disguise. With Airwallex Optimize 360, businesses gain AI-powered, adaptive intelligence that continuously optimizes every transaction, balances conversion with cost and fraud, and scales globally with local depth.

It’s time to move beyond legacy thinking. Turn payment optimization from a black box into a growth engine.