Israeli fintech Kipp, which helps card issuers and merchants approve transactions that would otherwise be declined for insufficient funds or exceeded limits, has been acquired by an investor group led by The Lifetime Value Company, Finextra reports. Terms were not disclosed. In its model, the merchant pays a premium for selected transactions, while the consumer pays nothing extra and the issuer keeps control of the risk. The company will keep operating independently and is adding former American Express and Worldpay executives to its leadership.

What it means: Declines for low balances are a hidden cost across the payments system: the merchant loses the sale, the issuer loses interchange income and the customer is frustrated. Kipp offers an unusual fix in which the merchant pays to have the transaction approved and the issuer takes the small risk that the amount is not covered. The model mainly suits markets with heavy use of credit and debit cards close to their limits, such as the US, which explains the expansion there. In Europe, it would raise questions under consumer information and consumer credit rules, since it effectively grants a small overdraft. For Greek online shops, the main lesson is that decline rates are worth measuring and analysing by cause. Often a share of declines comes from technical reasons, such as wrong data or overly strict fraud rules, and can be reduced by working with the card acquirer. Raising approvals by a few points has a direct effect on sales, especially in peak periods such as the November sales.

Read the original on Finextra

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