U.S. gateway providers have cut the average transaction time in half to 1.6 seconds from 3.2 seconds only a year ago, according to data compiled by Omaha, Neb.-based researcher The Strawhecker Group.
Derived from the firm’s Gateway Enterprise Metrics platform that debuted in 2017, the results show that the 12 participating gateways also had an average uptime of 99.997% in August. That means GEM gateways had an authorization fail rate of 27 basis points (a basis point is one-hundredth of a percent) of total transactions processed.
The measurement service uses anonymous transaction data to calculate the gateways’ performance. “What GEM does is it shows you the merchant experience with the gateway, which is not always the same as internal monitoring would show,” says John Kirkpatrick, senior associate at Strawhecker. “That is important because if a transaction never gets to a gateway they have nothing to monitor.”
Gateways are taking on increasing importance in payments because of the growth in online transactions as e-commerce sales build and more payments companies target integrated payments. A typical gateway transaction starts at the merchant account, moves to the gateway, and from there goes to the acquirer, processor, network, and card issuer, in that order, before returning down the line following the authorization decision.
“The importance of the gateway is increasing in the payment infrastructure,” Kirkpatrick tells Digital Transactions News. “They’re becoming more critical with each generational change in the payments industry.”
A tool like GEM helps gateways measure their performance against others. Results, for example, might indicate a gateway’s boarding is on par with its competitors, but it has a performance issue. GEM can help gateway operators fine tune their systems, Kirkpatrick says.
Critically, the service also examines authorization failures. For example, an extrapolation from Strawhecker’s data indicated there were 15 million credit and debit transactions that failed in August because of reasons not related to the cardholder account. A technology hiccup somewhere in the process disrupted the transaction. These failed transactions equate to $1.2 billion in lost sales. Strawhecker forecasts there will be more than 80 million failed credit and debit transactions in 2018 because of technology glitches.
A hiccup might be a timeout in the transaction, if, possibly, the gateway’s database is locked, Kirkpatrick says. Strawhecker uses actual debit cards loaded with funds to measure gateway performance.
Participating gateways can see comparative data from other participants, but identifiable information is not shared, says Al Novacek, GEM operations manager. For example, Strawhecker can measure the merchant-onboarding process in seven areas, Novacek says. “We’re doing it without any involvement from the gateway,” he says.
While some retailers have asked to view the GEM reports, Strawhecker will not disclose which gateways participate. Instead, it intends awards—for best performance, for example—it doles out to provide some insight for merchants, Novacek says.