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Strategies To Improve Success Rate And Enhance Customer Retention

The Indian payment industry is one of the fastest-growing and most dynamic in the world, with a projected value of $10 trillion by 2026. Digital payments will constitute nearly 65% of all payments by 2026, up from 40% today. However, there are still some challenges and opportunities that need to be addressed to achieve this potential.

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Success Rate 

One of the key challenges is the high failure rate of digital transactions, which affects customer satisfaction and loyalty. According to a report by Mordor Intelligence, the failure rate of digital transactions in India was around 10% in 2022, compared to less than 1% in developed countries. The main reasons for this are poor internet connectivity, technical glitches, regulatory issues, and frauds. A high failure rate not only affects the user experience and trust in online payments, but also leads to credit reversal failures, which means that the money deducted from the payer’s account is not credited to the payee’s account in time. This can result in customer complaints, disputes, and refunds, which increase the operational costs and risks for the banks and payment service providers.

Therefore, it is imperative for the Indian payment industry to adopt strategies to lower the failure rate of online payment transactions and enhance customer retention. Some of these strategies are:

  • Upgrade the back-end infrastructure: The banks and payment service providers should invest in upgrading their back-end infrastructure, such as CBS, servers, networks, and security systems, to handle the increasing volume and complexity of online payment transactions. They should also ensure that their systems are compatible with the latest standards and protocols of UPI and other payment systems. They should also monitor their systems regularly and resolve any issues promptly.
  • Leverage data analytics and artificial intelligence: The banks and payment service providers should leverage data analytics and artificial intelligence to identify the root causes of transaction failures, predict potential failures, and prevent them proactively. They should also use data analytics to segment their customers based on their behavior, preferences, and needs, and offer them personalized and relevant products and services to increase their loyalty and retention.
  • Improve customer service and grievance redressal: The banks and payment service providers should improve their customer service and grievance redressal mechanisms to address any issues or complaints related to online payment transactions quickly and effectively. They should also educate their customers about the benefits and risks of online payments, and provide them with clear and transparent information about the transaction status, charges, refunds, etc.
  • Innovate and differentiate: The banks and payment service providers should innovate and differentiate themselves from their competitors by offering new and value-added features and services to their customers. For example, they can offer instant cashbacks, rewards, discounts, coupons, or loyalty points for using online payments. They can also offer buy now pay later (BNPL) options or flexible repayment plans for online purchases. They can also partner with other players in the ecosystem, such as e-commerce platforms, merchants, fintech startups, etc., to create synergies and cross-selling opportunities.
  •  By using payment orchestration, merchants can reduce their failure rate by avoiding downtimes, technical issues, or fraud rejections that may occur with a single PSP. Payment orchestration also enables merchants to access a wider range of payment methods and markets without having to integrate with multiple PSPs individually. This can improve customer satisfaction and conversion rates, as well as lower operational costs and complexity.

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Low Retention Rate

Another challenge is the low retention rate of digital payment users, who often switch between different payment modes or providers based on convenience, cost, or rewards. According to a report by Expert Market Research, the retention rate of digital payment users in India was around 60% in 2022, compared to over 80% in developed countries. The main reasons for this are lack of differentiation, personalization, and engagement among digital payment providers. Therefore, a final strategy to improve customer retention is to create a financial services marketplace that offers value-added services and products to customers based on their needs and preferences. This can be done by leveraging data analytics and machine learning to understand customer behavior and preferences, and offer customized solutions such as loans, insurance, investments, or bill payments. Furthermore, creating loyalty programs and gamification features can also help increase customer engagement and retention.


To summarize, the Indian payment industry is poised for tremendous growth and innovation in the coming years. However, to achieve this potential, some strategies need to be implemented to improve the success rate of payment management system transactions and enhance customer retention. These strategies are: expanding the merchant acceptance network; enhancing the infrastructure and security; and creating a financial services marketplace. By implementing these strategies, the Indian payment industry can lower the failure rate of online payment transactions and enhance customer retention. This will not only improve the user experience and trust in online payments but also boost the growth and profitability of the industry.

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