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Usually online transactions are processed successfully, but sometimes payments can fail. The payment processing flow includes multiple role players and each can be responsible for a transaction failure.
Online card transaction failures are usually beyond merchant control. However, there are certain actions a merchant can take in order to complete a transaction or prevent transaction failures in the future. This post will describe the usual reasons why online card payments fail and what to do to either prevent a payment from failure or process the payment successfully.
Firstly, let's cover who is involved. The online payment processing flow includes four main players – buyer (cardholder), merchant, acquirer and issuing bank. Each can be (knowingly or unknowingly) responsible for stopping a transaction from being successfully processed. So, how can each be responsible for payment failure?
| Cardholder | Human errors during input. Probably the most common reason why transactions fail – buyer fails to enter correct card data. |
|---|---|
| Issuing bank | Can fail the transaction if it violates cardholder’s rights. Also, if issuing bank notices signs of potential fraud or there are technical reasons that interfere with the transaction. |
| Merchant | Merchants are rarely responsible for payment failure. However, merchants can have an indirect impact on transaction failures. For example, if the issuing bank does not approve the merchant’s business type. |
| Acquirer | Reasons why the acquirer would be responsible for payment failure are mostly related to technical issues. For example, incorrect configuration with the merchant account. |
Basically, the payment processing flow is merchant and acquirer vs. cardholder and issuing bank. When a cardholder attempts to buy something from a merchant's website (initiates a transaction), both the merchant’s and acquirer’s best interest is a successful transaction. While the issuing bank is responsible for protecting their client’s (cardholder’s) funds and rights.
When a transaction fails, the merchant should receive an error code (called “Response codes“) and name of the error. Each response code identifies a reason why a transaction failed so that a merchant can act accordingly to fix it. Merchants should note that response codes are sent by issuing banks. Acquirers do not determine these decline codes, and only display them in your merchant account.
Payment response codes that are down to the cardholder or issuing bank are usually numbered similarly (for example, 3000, 3001, 3002<…>3099). Error codes that are down to the acquirer or other reasons are usually very different (for example, 9999 or 6000). Basically, this can help identify whether payments fail due to the acquirer and merchant or cardholder and issuing bank issues.
Sometimes merchants can receive “Do not honour” response codes. Learn more about them in our 'Reasons for Do Not Honours' blog.
Understanding the response codes and their names can help you identify who to contact to resolve the payment failure.
As mentioned above, online payments fail due to cardholder errors, issuing bank interests or acquirer issues. Below we will review common reasons for payment failures.
We're all human and often make mistakes so it's not surprising that the most common reason why transactions fail is probably cardholder errors. Cardholders might fail to enter the correct details: card number, CVV code, expiration date or their name. Whenever a buyer fails to correctly input their payment information at the checkout, the merchant receives an error code. Such errors are usually easy to solve – just contact the buyer informing them that they failed to input the correct card details.
The good news is that buyers usually recognise that they entered incorrect information and correct themselves on the next payment attempt. Usually, cardholder errors are resolved on their own. However, if the buyer tends not to try again, you can always follow up and ask them to try again.
Response codes resulting in cardholder errors can also help you identify potential fraud. Codes like “Hot card, pick up” or “Special pick up” can indicate stolen or lost cards being used. If you get a lot of errors resulting in buyers failing to enter correct card data, this might mean that the fraudster is attempting multiple transactions. The merchant should check subsequent transactions for any signs of fraud.
Card-issuing banks are responsible for ensuring a safe and transparent online payment environment. Their goal in the payment processing flow is to ensure that the cardholder acts within their rights and that their rights remain intact. The issuing bank connects the merchant and cardholder’s bank account, thus they check the payment elements related to both the merchant and cardholder.
The issuing bank is likely to fail a transaction if there are any uncertainties or possible signs of fraud. For example, the issuing bank is the one responsible for declining a transaction if there are insufficient funds in the cardholder’s bank account. In addition, it checks whether the cardholder is able to conduct a transaction – a payment might fail if it interferes with the withdrawal limits or other restrictions set upon a card.
The issuing bank also has fraud prevention policies. If there are signs that a transaction might be fraudulent, the issuing bank might attempt to fail the transaction. Such error codes require special attention as it is direct proof that your business might be under fraud risk.
In some cases, issuing banks might reject a transaction due to their unwillingness to work with the merchant or website (based on the Merchant Category Code or issuer’s acceptance policy). In addition, there might be other reasons why the issuing bank would decline a transaction. For example, unspecified reasons or connection errors. In such a case, you should contact the bank to learn more about why the transaction has failed.
Rarely do error codes occur due to the acquirer. When an acquirer accepts a merchant for payments, they are sure that the merchant is eligible to process payments. However, similarly to the issuing bank, the acquirer is responsible for the online payment ecosystem.
For example, acquirers usually have rules configured to fight fraud. If a transaction does not comply with the rule, it might be declined. In addition, the acquirer might sometimes face technical difficulties that would prevent a transaction from being processed successfully.
The acquirer is in the merchant's side of the field. If you receive errors that are strange and stand out from the issuing bank or cardholder errors (as mentioned, they are usually similar), contact your acquirer immediately.
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