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How to Reduce Credit Card Declines and Increase Revenue (a Guide)

How to Reduce Credit Card Declines and Increase Revenue (a Guide)
23 Feb 2023

What would you do to grow your revenue by even just 1%? Would you spend extra money on marketing? Sales?

What if we told you that you can add 5-10% to your revenue without spending an additional dime on your existing operation?

Every year, businesses worldwide lose $800 billion to declined card payments. In this article, we will show you how to recover that revenue and never suffer from incorrectly declined transactions again. It’s going to be like picking up money from the floor!  

Let’s dive into the world of declined payments to understand what they are, why they happen, and how you can rescue them.

What Are Credit Card Declines?

To learn how to fix the problem, we need to first understand it. Hence, this is a quick yet insightful run-down of everything you must know about declined card payments.

Hard Declines

Hard declines are payments declined by the card’s issuer. The most common hard declines are card lost or stolen errors, and invalid card.

Soft Declines

Soft declines happen for various reasons, from technical problems to acquirer/gateway rejection due to fraud suspicion. Soft declines are often dependent on the payment method used for processing and might not be final.

With the right technology, most soft declines can be retried seamlessly within the payment session because they don’t require customers to re-enter their details. Saving soft declines in real-time will rescue both revenue and customers, as they’ll never see the initial rejection.

Why Do Cards Get Rejected?

After a transaction is declined, the acquirer/gateway notifies you of the reason why the rejection happened: these are the declined card codes. These codes can be quite cryptic and, to add to the problem, Profitwell discovered that about 25% of the declined card codes issued are incorrect. Some processors don’t have the latest technologies and giving too much information about declines might aid fraudsters; these two facts combined make decline codes hard to decipher. Nonetheless, these error messages are a place to start when we want to understand how to minimize payment rejection.

Every payment gateway has different codes and error messages, but they often look quite similar, so we put together a list for you with an explanation of what each error means. If you don’t find your specific error message, look for a similar one.

Decoding the Most Common Decline Messages

Below you’ll find a breakdown of the most common declined card codes:

Error MessageMeaning
Invalid credit card numberThe card number is incorrect
Invalid addressThe address entered does not match the one in the issuer’s database
Do not honorThe issuer fraud filter has been triggered
Suspected fraudA fraud filter has been triggered
Transaction declined (suspecting manipulation)A fraud filter has been triggered
Processor declinedThe acquirer/gateway has declined the payment
Transaction not allowedThe acquirer/gateway has declined the payment
Declined by payment systemThe acquirer/gateway has declined the payment
Expired cardThe expiration date on the card has passed
Card reported lost/stolenThe card was flagged as stolen or lost
Insufficient fundsThe cardholder doesn’t have sufficient funds in their account
Risk management transaction timeoutThe provider’s risk management system did not respond on time to the request
Session expiredThe user took too long to complete the payment
Invalid payment data. You are not configured for this currency or sub type (country or brand).The acquirer/gateway does not support the currency, country, or brand of the card
Invalid Order CurrencyThe acquirer/gateway does not support the currency of the transaction
Transaction declined by authorization systemGeneral decline message
Transaction declined (limit exceeded)The user tried to pay more times that they are allowed

We know that these look like a lot (and there are more!), but technology can come to our aid and prevent some of these errors from occurring in the first place. For example, we fix these errors by default for our clients:

  • Invalid credit card number: Advanced checkouts can notify the user immediately when the entered credit card number doesn’t exist, so they can correct the mistake without incurring a rejected payment
  • Expired card: same as above, state-of-the-art systems avoid this nasty error by notifying the user before the payment can be submitted
  • Currency, country, or card not supported: you can read more about it further down, but payment operations platforms allow you to route specific card bins, issuing countries, currencies, and much more to dedicated providers to ensure approval

A special mention must go to the “Do not honor” error message, which is by far the most generic and confusing one. In order to rescue genuine transactions flagged with this error (and all other rejected transactions that haven’t reached the issuer), you need an automatic transaction retry technology that submits a declined payment to fallback providers in real-time. You can read more about this further down.

The True Impact of Credit Card Declines on Your Business

You might think that a few lost transactions are no big deal: you’ve lost a couple of bucks (maybe a couple of hundred), so what? There are plenty of fish in the sea, as they say. Well, the repercussions of every sale lost to a declined card transaction go way deeper than the immediate loss, and will make you want to fix the problem and reduce declines as much and as quickly as possible. There are 5 levels of damage that your business sustains with every declined card payment:

  1. Immediate revenue loss. You built an amazing customer journey, invested a lot of time, resources, and money, just to see the sale fail right before the finishing line because of something you have no control over. This is frustrating!
  2. Loss of customers. Lifetime customer value (LCV) is the total profit you will generate from a specific user, including subscriptions, returning purchases, and up-sales. If a customer is rejected through a false positive, they will not return to you and take their business to a competitor; a study by Profitwell found that credit card declines “account for 20-40% of your churn and cancellations in the world of B2B SaaS. It’s the largest single bucket of churn.”
  3. Word-of-mouth referrals. Unhappy customers will not recommend your brand to friends, family, and colleagues. According to a study by Nielsen 92% of people trust product recommendations from people they know; that’s a lot of customers you may be losing.
  4. Marketing and sales efforts. You will lose the money you spent in marketing and sales to bring that lead to the checkout. According to Riskified, the true cost of a declined transaction is about 300% of the money lost at checkout, this means that for every $100 payment declined you are really losing $300.
  5. Discredited brand image. Failed word-of-mouth recommendations may turn into a merchant’s worst nightmare: unhappy users discrediting your brand. According to this article, customers that had a bad experience are twice as likely to leave a bad review, and 80% of people trust online reviews as much as reviews from people they know. You do the math...

How to Reduce Declined Card Payments

Now that we are all on the same page about credit card declined meaning and repercussions, we can dive into the available solutions. There is a lot a merchant can do, and we are positive that some or all of the tips that follow can help you.

Use Automatic Fallback Payment Providers

You can recover revenue by retrying soft declines, it’s that simple and it’s like picking up money from the floor. There are technologies available that submit a transaction declined by an acquirer/gateway to a series of fallback providers until the payment is approved.

In order to use these technologies, you must use multiple payment providers in your payment stack. You might ask, “Why should I use multiple payment providers, while my processor already offers transaction retries?”. While this is true for many providers, there are some issues with same-provider retries, let’s see what they are. 

The Problem with Automatic Retries

A lot of payment gateways have retries turned on by default, but these present several problems:

  • They are not in real-time. In fact, a transaction can take several days before being retried, and that’s plenty of time for a customer to go spend their money somewhere else. Like Ethoca found out, “475 Million cardholders are at risk of moving a preferred card to the back of the wallet after a decline, abandoning their eCommerce purchase entirely or switching to another competitive online store”
  • These systems always retry the transaction with the same gateway, so the chances of conversion are pretty low. Why should the same system approve a transaction that it has already declined?
  • As per this Paysimple article for every decline you are still paying a transaction fee, even if you lose the sale. These are usually small fees that add up in the long run

Seamless Multi-provider Retry Solutions

The most advanced payment operations platforms allow you to set fallback scenarios in which backup processors try to approve a transaction after it has been declined. This is how it works: when the transaction is declined by the first provider in the flow, the platform seamlessly retries it with the second provider and so on until it’s approved or all the processors have declined it. There are three main advantages to this ground-breaking technology:

  • The retry happens in real-time within the payment session (i.e., while the user sees Processing...), so the payment experience is not compromised
  • The same transaction is retried with different acquirers, hence the approval chances are much higher (up to 30%!)
  • You won’t have to go through the trouble of checking if a declined payment has been retried and this will take some of the load off your customer support

Optimize your payment providers

Some may call it pre-dunning, but it all boils down to knowing your payment providers, and optimizing them in order to minimize declines at the checkout level.

Create the ultimate checkout experience

As much as being proactive will limit declined transactions, some will always slip through the cracks, this is why improving your payment experience (PX if you like) is a great way to retain customers even if their payment failed.

Customize the Payment Experience

Every user loves a personalized experience, especially when it comes to payments. The ideal flow encompasses:

  • Serving the customer only the payment options relevant to them
  • Integrating the checkout seamlessly in the UI
  • Avoiding popup and redirects, which may lead to mistakes and cart abandonment

From a technical point of view, all these things are very challenging to achieve, especially for SMEs (but enterprises could often use a hand too).

This is where a payment operations platform steps in. With a single software you can:

  • Create custom payments flow for every country or region
  • Have one dynamic checkout that adapts to every customer and keeps your brand’s look and feel
  • Keep users inside your website, with no pop ups or redirects

These are all things that minimize the risk of mistakes and declines because you allow your cross-border users to pay like locals.

Offer Multiple Payment Options

Modern, international businesses are increasingly facing the need to offer multiple payment gateways. One of the main reasons is that, as Profitwell discovered, “if your processor is in the United States, but you have a customer you’re trying to charge in Finland, there’s a 250% increase in the probability of that charge getting falsely flagged as fraud”, and the same goes for any business, anywhere in the world, trying to process cross-border transactions. The simple truth is that when accepting international payments decline rates and false positives go through the roof.

A proactive solution to card declining caused by cross-border payments is to offer local payment methods (ewallets, ebanking, local vouchers, mobile payments, BNPL, and even crypto as it becomes more popular), and Profitwell rightly points out that local payment methods have lower decline rates and suggests that “you should have a business entity with a processor in each of the main regions you serve.” Unfortunately, this may be challenging and expensive for big enterprises and right-out impossible for SMEs and startups. A payment operations platform allows easy, codeless connection to many processors from one platform, allowing you to benefit from fewer credit card declines while saving you the humongous costs of integrating with multiple providers.

Check your fraud filters

One last thing to mention when talking about payment provider optimization, is fraud filters. According to Chargebee “part of battling card declines is fine-tuning the fraud filters in your control so they don’t (for the most part) get in the way of good orders.” This is especially true considering that Ethoca found out that 52% of orders perceived as fraudulent are actually good. Moreover, this study estimated that only 1 transaction in 5 reported is actually fraudulent.

Every transaction goes through several fraud filters, and there are two categories of fraud prevention: known and unknown. These are the main types of fraud prevention systems you’ll come across:

  • The issuing bank’s authentication, like 3DS and 3DS2 (known)
  • The payment gateways or payment providers (unknown)
  • Your own fraud detection tools, if you have any (known)
  • Third-party fraud detection tools (known)

Unfortunately, these tools don’t always collaborate, follow different rules, and might overlap. This means that they might catch good transactions and flag them as fraudulent; the infamous false positives.

Let’s see in detail each of the above-mentioned fraud prevention mechanisms, and how they influence declined card payments.

3DS and 3DS2 Verification

3D-Secure is a security layer that requires the cardholder to go through an additional step in order to verify their identity before a payment. Unfortunately, if a transaction is declined because the 3DS/3DS2 step was not completed successfully, there is not much you can do as a merchant.

Payment Gateway/Acquirer Fraud Filters

These are fraud prevention mechanisms put in place by your processor, some of them are put on you as a merchant. The good news is that the vast majority of the declines generated by these filters can be retried and approved with fallback processors!

Your own fraud filters

These are rules that you put in place in your processor’s back-office or in your payment operations platform. For example, you may decide to block a specific card bin or a card brand. By analyzing your payment data carefully, you can tune these restrictions until you are declining only fraudulent transactions.

Third-party fraud detection tools

Software like Riskified or Forter are meant to prevent and block fraudulent activities on your website, including malicious transactions. Just like your own fraud filters, you have control over these tools and you can fine-tune them based on data-driven insights.


Final Thoughts

Thanks for sticking with us all the way to the end! Declined credit card payments are no joke, and handling them (or not) can get expensive both in terms of money and resources.

Luckily, we at BridgerPay have listened to thousands of businesses and we created a technology that not only takes care of the actual problem of declined card payments but gives you all the tools and support to prevent them, unlocking new revenue in the process!

Moreover, with our self-onboarding flow, you can start reaping the benefit of an end-to-end payment operations platform immediately, and for free! Give it a try.

This is what Yehoshua Fried, CTO and Co-founder at Calypsa by ModLi, had to say about BridgerPay: