Let’s find the major reasons why transactions fail
PaySpace Magazine once wrote an article on how to act when a bank card is declined. Today we’d like to take a look at the bigger picture. We will talk about the major reasons for transactions fail.
Statistically, talking about online business, 1-2 out of 10 transactions fail. Sure, it’s just a statistic, and the figure may be somewhat overstated, but you can’t deny that this happens every day. It depends on the connection quality, location, area, and type of business, but the fact of the matter is that it affects online businesses. Maybe, you have faced such an unpleasant situation yourself. Thus, we hope it will be beneficial for you to know the types of transaction fails since it can help you determine what further action should be taken in the event it happens to you. Knowing the reason, you’ll probably know what to do next.
Basically, when it comes to failed transactions and reasons for them, experts distinguish three major categories: technical-related reasons, risk assessment reasons, and financial reasons.
But before we start, we believe it will be appropriate to refresh your memory concerning how card payments work. If you are 100% sure you know how it works, then you can skip to the part about transaction fails.
Nuts and bolts of card payments
First of all, it is all about payment service (PS) providers. If you run an online business (i.e. site), or just buy things from online stores, then you should know that a transaction cannot be carried out without a PS provider. It is an obligatory part of card payment acceptance. Moreover, you’ll have to deal with an acquirer, which collects money for you (sometimes a PS provider offers additional services, so it can be an acquirer as well), a card network (Visa/MasterCard/CB/UnionPay, etc), and an issuing bank (in this situation, it is the bank your clients work with).
Now, we’ll tell you how the payment process works, and we’ll try to make it as simple and brief as possible. Here’s a brief scheme of the process:
PS provider => issuing bank;
What does it mean? It means that a PS provider will offer an issuing financial institution to accept the payment/transaction. An issuing bank, in turn, can accept or decline it. At this point, an issuing bank will decide whether it would be right to accept/reject a transaction, based on two major parameters (financial and risk parameters). Acceptable financial parameters mean that a client has enough money to carry out the transaction, and it can be verified via a bank account, payment ceiling, or another convenient method. Risk parameters include verification of whether the transaction is fraudulent or not. Thus, an issuing bank will accept it if there is sufficient evidence that the transaction is not fraudulent.
Now, let’s get straight to business (reasons for transaction fails, in case you have forgotten).
The first point is quite simple and straightforward. You don’t have to go through all the customer service support training courses to understand that failure for technical reasons is just a tech malfunction in one (or two, or maybe all) of the link in the chain (PS provider, card network, 3-d secure provider, acquirer, or issuing bank). There is no reason to dwell on the details too much since you’ll probably not be able to fix anything unless you are a pro in this stuff.
Risk assessment reasons
We’ve mentioned it above, when we were talking about the principle of work of card payments. If it is really due to a risk assessment, then it means an issuing bank most probably has rejected the transaction, considering it fraudulent or risky. It can also happen due to the acquirer. It usually depends on several parameters, which define the level of the transaction’s risk: location of the transaction, location/country of the card vs. location/country of the retailer, time when the transaction was carried out, the type of business, etc.
We can’t recommend you much here, but we can say when a transaction is considered to be risky (i.e. large amount of money, cross-border transaction, etc), it is vital to send as much info to the issuing bank as you can. Moreover, if you are recommended to execute all the required security checks, be sure to make them. Different countries have different security requirements, so if you work with foreign banks, please, don’t goof around.
There is such a definition as the human factor, also known as “human error”. It can be a wrong/invalid card number/CVV, missing information field, etc. And it is one of the problems that can be prevented and repaired easily.
However, if financial issues (no funds in a bank account, payment ceiling issues, etc) has caused the failure, then it can be much more complicated. Mostly, it can be solved through the implementation of the appropriate payment strategy. Nevertheless, it is more about business than tech issues. Here, progressive financial solutions (for instance, split payments, credit solutions. etc), and advanced retry strategies can come in handy.