Learn more about the world of payment declines – What declines are, why they are important, and how to handle them.
A buyer, Mary, visits a website to purchase a pair of shoes. She finds the perfect pair and is ready to check out. But when Mary tries to place her order after selecting a payment method, she’s redirected back to the cart page. After some confusion, she goes through the checkout process again, but once more she’s directed back to the cart page. Without understanding why she keeps getting redirected, Mary decides to take her business elsewhere, leaving her cart and the merchant’s website behind.
In the story above, what happened? The merchant didn’t properly handle a declined payment, and so the buyer didn’t understand why she was getting redirected. From her perspective, she may have thought there was an issue with the site, when in reality the issue was with her payment method and how the decline was handled by the integrator.
Poorly managed declines = lost sales
Declines have a massive impact on your bottom line. Credit card decline rates for physical goods merchants are often between 3% and 4%. For digital goods merchants these numbers sky rocket to a rate of 15% and higher, on average. According to estimates from Ethoca’s research report on false declines, they estimate there are 1.9 billion CNP (card not present) purchases, representing $145.9 billion in sales, declined each year.1 Not taking declines seriously could cost you a lot of business.
Technically, credit card declines occur when a card payment cannot be processed and the transaction is declined by the payment gateway, the processor, or the bank issuing the money. Managing declines in a way that informs your customers of the issue will help you create a better, more transparent experience. It also can be the difference between keeping shoppers on your site and losing a customer for good. Clear messaging around declines provides three distinct benefits; 1) Uninterrupted service 2) Customers engagement in the shopping experience 3) Up-to-date payment methods, which often yield higher payment success rates.
Not all declines are created equal
Declines come in different types: some declines may be the direct result of the cardholder’s actions while others are the result of external factors. For instance, some declines are due to the type of buyer activity or simply because of an expired card, a canceled card, or insufficient funds remaining on the card. There are two categories of declines: Hard declines and Soft declines.
A Hard decline occurs when the issuing bank or processor will not process the transaction and retrying the card won’t change the outcome. Hard declines are not recoverable at the time of the transaction. Soft declines, on the other hand, may be recoverable at the time of the transaction by retrying the authorization. It’s essential for merchants to have a customer outreach process to enable the customer to recover from the decline and complete their order.
Below is a table that illustrates some (not all) reasons for a decline.
Types of declines
|Error message||Why this error occurs||Decline Type|
|Invalid credit card number||The card number entered is incorrect||Hard|
|Invalid address||The billing address does not match the card network records||Hard|
|Do not honor||The issuing bank’s fraud filter has been triggered||Soft|
|Processor declined||Payment authorization has been declined at the issuing bank||Hard|
|Expired card||The credit card being used has expired||Hard|
|Transaction not allowed||Payment authorization has been declined at the issuing bank||Hard|
|Card reported lost/stolen||The issuing bank has marked this card lost or stolen||Hard|
|Payment instrument not supported||The gateway doesn’t support the payment method being used||Hard|
|Insufficient funds||There aren’t enough funds in the associated bank account to complete this payment||Soft|
Three key steps to handling declines
It is important to understand the basics of the decline process. Decline handling happens in three stages.
Catching the decline error. The merchant receives a decline response from the payment processor upon the customer placing their order.
Upon receiving a decline response from the payment processor, the merchant includes a clear message indicating the payment was not successful, along with an actionable step for the customer to complete their checkout.
Page to redirect the customer. Depending on the decline response, merchants may not want the customer to check out. For instance, if they detect that the customer has a lost or stolen card, retrying an order will likely not result in a purchase conversion. Thus, it makes more sense to message to the customer to indicate that the payment was not successful, redirect them to the cart page, and suggest the selection of a new payment method.
For example, let’s consider that a customer has insufficient funds when placing an order:
For more information and best practices on handling declines, please visit Amazon Pay Documentation. As you are evaluating payment solutions to help streamline your decline handling process, consider Amazon Pay. Our service provides a quick, easy way for hundreds of millions of Amazon customers around the world to access a trusted, secure way to pay, using the same address and billing details in their Amazon account on third party sites and stores. Learn more.
1Ethoca, Solving CNP False Declines Report, 2017.