Understanding Online Payment Failure And Tips To Avoid It

London a £106bn key driver of surging global online sales in wake of pandemic

Online payment failure causes losses for businesses.

Online merchants lose up to 62% of customers who have experienced a failed transaction every time a customer tries to purchase goods and services from your site.

Then when getting to the checkout page, filling in their card details, and when they click pay, they are told to try again. Most customers would abandon the transaction even though going through the payment flow won’t take them that long.

Digital payments are the most preferred way to make and receive payments. As a merchant, online payment failures are an issue that you shouldn’t overlook. Doing so can result in more abandoned carts, loss of revenue, and poor customer experience.

What does the payment process look like?

When customers get to your site and start the payment process, the payment gateway provides the route to and from your payment processor. After running the usual fraud checks and 3D Secure confirmation, the card information is then sent to the acquiring bank, also referred to as your merchant acquirer. Then the acquiring bank sends the payment details to the card networks.

After a series of other security checks, the payment is sent to the issuing bank, where it can get approved or declined. Then the approved or declined payment message is sent to the merchant. This entire process takes less than a second.

Types of payment failures

Payment failures are categorized into different categories depending on the situation.

Failure from the customer’s side – such an error happens when the customer provides incorrect card information, has insufficient funds, or has the wrong one-time password (OTP).

Failure from the merchant’s side happens when there is a security or technical error that the merchant is responsible for.

Failure when a data transfer error occurs – this usually happens when the customer gets a payment failure text, but the payment eventually goes through. In this case, the customer’s account will be debited.

Failure when the amount is not charged – means the payment failed and the customer’s account was not debited.

Causes of online payment failure from the merchant’s side

The merchant side’s reasons for online payment failure are more complex, and we need to cover that in detail. Here are the leading causes of online payment failure from the merchant’s side

System downtime

The key players involved in the payment process include the payment processor, payment gateway, issuing bank, and acquiring bank. Whether planned or not, these players in the payment flow can experience system downtime.

If any of the named parties in the online payment process experience downtime when a customer makes a purchase, the server can get approval for the transaction. When this happens, the transaction won’t be complete, and it will be registered as an online payment failure.

Payment technical failure

When customers are on the checkout page, they need to select their preferred method of payment, whether credit card or any other method of payment. After selecting the payment method, they need to fill in their payment details for the payment process to begin. It takes a few steps to take the money from the customer’s account to the merchant’s account.

The customer’s data and the payment details are then sent to the payment gateway to be transferred to the card network. After verifying the details and the authorized transaction, the cash is sent to the acquirer and then transferred to the merchant’s account.

If there is a technical hitch between any of the steps mentioned above, an online payment failure occurs.

If the security is compromised

Detecting online payment fraud is a constant battle fought by nearly all the key players involved in online payment processing.

The banks, for example, issuing banks, are equipped with advanced anti-fraud tools. These tools analyze and verify if the transactions are authenticated. If the anti-fraud tools detect anything wrong or suspicious in the payment process, they can decline the transaction. Some of the red flags that anti-fraud tools may decline transactions include;

  • A security threat coming from the issuing bank
  • Several merchants have an upper limit on transactions, and if the transaction limit is exceeded, the payment can be declined.
  • There is a blacklist of bank identification numbers. It is automatically rejected if the transaction is initiated through a blacklisted BIN number.

Here are other common reasons for online payment failure

  • Expired cards
  • Misconfiguration of the payment gateway
  • Transaction blocked by the merchant account
  • Canceled cards
  • The payment method customer chose is not supported by the payment gateway
  • The customer’s account is flagged by the bank
  • Invalid billing address
  • Using a maxed-out credit card
  • Transaction obtained through a suspended or closed account

Tips to help reduce online payment failure

Online payment failures happen all the time in eCommerce businesses; however, there are some precautions you can take to reduce the rate of online payment failure, and they include;

1.   Use a payment gateway that routes the payments through multiple payment processors.

When a customer pays for something, the transaction details are sent to various parties, including the payment processor. If the payment gateway you use only allows you to send payments to one payment processor, the chances of experiencing payment failures or downtimes are higher.

2.   Look for an eCommerce payment platform with advanced features

Your online business grows daily, and it will place more demand on your payment processing platform. If you opt for basic payment features, it may not be sustainable for your business growth.

So ensure you find a payment processor that can handle your business growth and allows you to scale and process many transactions without technology failures or system crashes. And one of the best example is text to pay where your customers can make payments through their mobile phones by texting without hassle.

3.   Optimize your security

Ensuring you adhere to payment security regulations protects your business and your customers from fraudsters and other online scammers.

Ensure your business is PCI compliant to ensure you have no issues when processing payments.

4.   Accept numerous payment methods.

Using a payment gateway that allows you to accept numerous payment methods is a sure way to reach more customers and increase sales.