Payment declines: reasons and fixes

Imagine your customer trying to pay for your goods or services. They enter all the necessary data on the payment page and then see the 'payment declined' message. What is the most expected reaction? If your product or service is really important or rare, the customer might try again. But usually, they'll switch to one of your competitors and buy there. Sure, the expected behaviour depends on the reasons for the decline or even on a user's mood. But it is advisable to take all possible steps to minimise the likelihood of declined payments.

This article covers key takeaways on factors influencing payment gateway success rates. Let's go!

What are the reasons for declined payments?

Payment declines can happen for a variety of reasons, including technical issues, incorrect card information, or exceeding credit limits. Technical issues, such as system glitches or network outages, can lead to payment declines during the transaction process. Entering incorrect card information, such as a typo in the card number, expiration date, or CVV, is a common reason for declines. Exceeding your credit limit is another common reason for payment declines and can negatively affect your credit score. Sure, the expected behaviour depends on the reasons for the decline or even on a user's mood. But it is advisable to take all possible steps to minimise the likelihood of declined payments.

Payment declines may occur at several points in the payment processing process for various reasons. The good news is that, in most cases, they are preventable. Certainly, sometimes they require actions on the user's side and sometimes on yours. Now let's drill down on the most common reasons.

Lack of funds

A vivid scenario: a customer wants to use a paid service but has no money in the chosen payment method balance. As practice shows, this accounts for about 40% of failed payments.

At first glance, the way out is simple — the user has to refill the balance and then retry to complete the purchase. And you can do nothing with it on your side. But there’s more to this than meets the eye. Keep in mind that a customer may not want to refill the balance at that moment. Or may just change their mind and decide not to complete the purchase. As far as it may lead to revenue losses, it’s not only your customers’ concern but yours too.

Here’s how you can resolve a declined payment in this case:

• Case 1. The user's card number is known, and it's not the first time they've made a payment on your website. This situation is perfect for working with loyalty – your company can show appreciation to a repeat purchaser. The further steps depend on the type of services or products you sell. For instance, after the response from the payment processor about the lack of funds, you might thank the user for being with your company and inform them that despite the declined payment, they received the product or service as a gift.
• Case 2. The user is unknown and has never made payments on your website. Offering an alternative payment option for the user would be a perfect solution. Thus you'll resolve a declined payment by letting the user retry with another payment system or online lending service (for example, services of online micro loans directly to the card).
• Case 3. The user is known but has never made payments on your website. Some processing centres offer a delayed purchase option, i.e. they make several retries to charge off money from the user’s account with a predefined frequency. A user gets the product or service, but his account is charged later. You may explicitly inform the user to refill the account within a certain period. Or you can even develop your own credit system, but this is fraught with overhead costs for implementing your own system of anti-fraud filters, blacklist users, and a scoring system.

Invalid card

This reason for a declined payment is beyond the merchants' control. Often, the issue is due to an expired card — credit and debit cards have an expiration date, and once expired, any attempt to use the card will result in a decline because it is no longer valid for transactions. Users should check whether they are using an old or expired card, and, if so, request a replacement card or an updated version from their issuing bank. Banks typically issue a new card when the old one is expired or damaged, but the new or replacement card must be activated before use. To avoid further declines, users should also update their payment information with the new or updated card details.

Anti-fraud filters

As the trickiest category, it includes a range of payment decline cases, sometimes quite strange ones. Still, the most common reasons for declines in anti-fraud are unusual payment locations or general unusual activity. Fraud alerts can be triggered by foreign transactions, as banks and card issuers monitor for suspicious or unauthorised activity to prevent fraud. If your card issuer suspects fraudulent activity based on unusual spending patterns, it may freeze your card, which can result in declines on legitimate transactions until you verify the activity with them. Notifying your credit card issuer about travel plans or large purchases can help prevent false fraud alerts that result in unnecessary declines. If a decline occurs due to suspected fraud, contact your card issuer to verify your card's status and resolve any issues.

What can be done? If a user and their payment reputation are known to you (no prior fraud or chargeback), try to contact your processing centre and request authorisation for this user to pay, despite the identified fraud threat. In other cases, segregate and consider each type of error separately and decide based on the frequency and amounts of rejected transactions. You will have to assume full responsibility for potential losses and risks.

Merchant account settings

This category includes all declined transactions that were not processed due to the billing restrictions specified in the contract with your payment processor. It can be the minimum/maximum number of transactions per purchase, the maximum number of transactions per day or month, geographic restrictions, and/or restrictions on the type of payment system. If you suspect one of these aspects to be the reason for a decline, try reconsidering the agreement.

Human errors

Many treat such declines as errors caused by users. But this category includes all obstacles that mislead users or obscure the essence of the target action, illogically designed interaction scenarios, and texts that can be interpreted ambiguously. So, this includes UI/UX and copyright errors as well.

• Notifications. If payment was declined due to insufficient funds, showing something like 'Please, choose another payment method or top up your account' would be better and friendlier than 'Payment declined' and encouraging the user to retry.
• Buttons. A user clicks the 'Pay' button on your website and is redirected to a payment page in a new tab to fill in the payment details — the implied action and the actual one do not match. The target action is 'Go to the payment page'.
• Payment details. Implement recurring payments on your site. The system will remember the billing details, preferred payment methods, and payment data of customers who often pay on your website.

Gateway downtime

This category might be considered the most controversial. On the one hand, you can't influence the declines that occurred on the gateway's side. Conversely, you can thoroughly search before choosing a gateway for your business. The declines in this category include all planned and unscheduled maintenance, as well as system or partner server uptime. By the way, do you know where they are hosted? Consider subscribing to the hosting news digest: the information there might be useful. Additionally, technical issues, such as system glitches, software updates, or network outages, can also cause payment declines at various points in the payment process.

Do you know how much downtime of your payment processor costs you? In fact, this equals the total amount of money passing through the gateway you use per minute (it will vary at times). So, the best solution for large projects is to include a failover partner to process transactions. To determine if you need an additional gateway and protect against potential issues, review the downtime of your current gateway in accepting payments (for instance, consider the last month). If technical issues persist, trying a different payment method may help resolve the problem and ensure successful transactions.

At Corefy, we empower businesses with a reliable solution for accepting payments and making payouts hassle-free. Our platform is designed for maximum uptime to minimise possible risks while processing your transactions. Contact us to find out more and make your payment flows frictionless and your customers' shopping experience smooth.