Your customer just finished adding items to his online cart, and they’re happy with the purchase they’re about to make. They enter their card details and click Pay, but suddenly something goes wrong. The card gets declined and the payment doesn’t go through. Your customer gets irritated, and you lose what could’ve been a much-needed sale.
According to Ethoca, over 1.9 billion card-not-present purchases are declined each year globally*. This represents $145 billion dollars in sales. Credit and debit cards get declined a lot more often than business owners realize, and as a result the payment is declined. While it is the customer who feels the most irritation at the prospect of a card decline, business owners also face their own frustrations. Not only do they lose a sale, but they also have an irritated customer who may not return to their business for future purchases, even though card declines are almost always an issue on the customer’s or card merchant’s end rather than the business owner’s.
In this article, we’ll look at the different types of card declines and how you can minimize the chances of them occurring.
What are the types of card declines?
There are two primary types of card declines: soft and hard.
Soft declines are usually temporary and are a result of technical or financial difficulties. This could be as simple as an abrupt break in the network connectivity or insufficient funds in your customer’s account. Soft declines can be overcome by retrying the transaction, and they will usually sort themselves out. However, it is advisable not to retry the transaction more than 2-3 times.
Hard declines, on the other hand, are caused by security issues that cannot be sorted out by retrying the transaction. Hard declines occur when the customer’s card issuer or bank does not authorize the transaction, for reasons such as possible fraud, invalid account information, or a lost or stolen card. In such instances, the customer will have to contact their bank or card issuer immediately to take corrective measures. It is not advisable to retry hard-declined transactions.
Once a customer has entered their card details and clicked Pay, if their card gets declined, they will be directed to an error message along with an error code. This is a typical scenario. This decline code helps the customer determine whether the card failure was a soft or a hard decline. Once you know that, you can decide what course of action you and your customer should take. These codes are not standardized across payment gateways. For example, PayPal has their own set of error codes, while another payment gateway such as Braintree have their own.
How can we determine the reason behind a transaction failure?
The error message that’s shown once a card payment has been declined gives the customer an idea of the reason for the declined transaction. However, this message is not always available to you, the business owner, to read or process. This is to maintain confidentiality between customers and their card issuers. Customers may not want businesses to know the specific reasons why their card got declined.
Card decline messages are deliberately kept vague and unclear. One reason for this is the fear of fraudulent transactions. Should a fraudster try to make a purchase using a stolen card, a detailed decline message could allow them to find ways around the fraud checks.
Here are some typical card decline messages and what they mean:
Insufficient Funds: Customer’s account does not have sufficient funds to make payment.
Limit Exceeded: Withdrawal limit of customer’s account has been exceeded.
Invalid card number: Card number entered is invalid.
Invalid address: Billing address entered does not match address on record with card issuer.
Do Not Honor: Customer’s bank is not permitting the transaction due to fraud concerns or unusual activity from the card.
While errors like ‘insufficient funds’ or ‘invalid card number’ clearly require the customer to take corrective steps, errors like ‘do not honour’ or ‘processor decline’ are a bit more tricky to deal with. While this kind of decline is intended as a safeguard against possible fraudulent transactions, it is often a result of a simpler problem such as a system failure, insufficient funds, outdated card information, or the business being located in a country different than that of the card issuer. Valid transactions often get incorrectly rejected for these reasons. These declines are called false declines, and they are a growing concern for businesses and card issuers all around.
False declines are often due to overly-protective checks put in place by banks in their attempts to curtail fraud. Unfortunately, this causes legitimate transactions to be needlessly rejected due to a fear of fraud. This leads to lost revenue for businesses and card issuers, and a terrible experience for the customer.
According to a report by National Merchants, U.S. ecommerce merchants lost around $8.6 billion to false declines in 20162. It’s important to ensure that you help your customers resolve card declines so you don’t lose sales.
What can I do to help customers handle a decline?
Most business owners assume it is impossible to prevent cards from getting declined. But there are some steps you can take to ensure you help your customer handle card declines and go through with their purchase.
1. Ask your customer to contact their bank or card issuer. This is a good way to start tackling the issue. In most situations, this should suffice to sort out the issue. This is also the safest way, in case of a hard decline.
2. Advise customer to try the payment again. Often customers are apprehensive of retrying a payment once declined. In such instances, advising customers to retry can help motivate them to go through with the payment. Do not recommend retrying after a hard decline, however.
If you have a recurring payment scheme with your customer, you have the option to set up dunning management systems. These systems automatically retry failed transactions after a couple of days.
3. Suggest alternate modes of payment, including card-free alternatives such as a bank transfer, mobile payment, or electronic check. This will reduce the chances of customers giving up on a purchase all together.
4. Narrow your fraud filters by reviewing your payment gateway’s fraud checks. Most gateways allow you to customize the rules which catch fraudulent transactions, such as removing the option to accept multiple currencies. Most often these fraud checks are set to reject a wide range of transactions in order to ensure maximum security for the merchant. But this also increases the chances of valid transactions being declined.
5. Send reminder emails to your customers. All cards have an expiration date. Sometimes a customer may forget the date and initiate a payment after the expiration date. This is especially problematic in a recurring payment scenario, where funds are pulled from the customer’s account automatically. By sending reminder emails to your customer to update their card credentials, you can avoid the chances of a card decline coming up.
Making the best of card declines:
It is impossible to eliminate card declines altogether, but you can take steps to help your customer sort out the decline and make the payment so you don’t lose a sale. While most of the responsibility for dealing with card declines is usually on your customer and their bank, ensuring you have good communication with your customer can make the process of tackling the decline a little smoother for them. While enabling aggressive fraud detection tools can help weed out fraudulent transactions, narrowing down your fraud checks can reduce the chances of a false decline and ensure that you don’t needlessly lose a sale. Finding the right balance between security and convenience can reduce the chances of your business being hampered by card declines.
Source: *2017 Ethoca Research Report – (2017, May 07). Retrieved from https://hs.ethoca.com/solving-the-cnp-false-decline-puzzle-collaboration-is-key