Why do online card payments fail?

Usually online transactions are processed successfully, but sometimes payments can fail. 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 text describes the usual reasons why online card payments fail and what to do to either prevent a payment from failure or process the payment successfully.

Who are responsible for online payment failures?

Online payment processing flow includes 4 main players – Buyer (cardholder), Merchant, Acquirer and Issuing bank. Each can be (knowingly or unknowingly) responsible for stopping a transaction from being successfully processed. How can each be responsible for payment failure?

Basically, payment processing flow is Merchant & Acquirer vs. Cardholder & Issuing bank. When a cardholder attempts to buy something from merchant website (initiates a transaction), both merchant’s and acquirer’s best interest is a successful transaction. While issuing bank is responsible for protecting their client’s (cardholder’s) funds and rights.

How to identify reasons for payment failures?

When a transaction fails, merchant should receive an error code (called “Response codes“) and name of 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, only display them in your merchant account.

Payment Response codes that are resulted due to cardholder or issuing bank are usually numbered similarly (for example, 3000, 3001, 3002<…>3099). Error codes that are resulted because of acquirer or other reasons are usually very different (for example, 9999 or 6000). Basically, this can help identify whether payments fail due to acquirer & merchant or cardholder & issuing bank issues.

Sometimes merchants can receive “Do not honour” response codes. Learn more about it here: “Do Not Honour” Payment Error Code: Reasons and Solutions

Understanding the response codes and their names can help you identify who to contact to resolve the payment failure.

Why do online card payments fail?

As mentioned above, online payments fail due to Cardholder errors, Issuing bank interests or Acquirer issues. Below we review common reasons for payment failures.

Cardholders

Probably the most common reason why transactions fail – cardholder errors. We are all human and people tend to make mistakes. Cardholder might fail to center correct: card number, CVV code, expiration date or their name. Whenever a buyer fails to correctly input their payment info at the checkout – merchant receives an error code. Such errors are usually easy to solve – just contact a buyer, informing that they failed to input correct card details.

Good news is that buyers usually recognize that they entered incorrect info and correct themselves on the next payment attempt. Usually cardholder errors are resolved by their own. However, if buyer tends not to try again, you can always follow up with such user and ask them to pay again.

Response codes resulting cardholder errors can also help you identify potential fraud. Codes like (for example) “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 fraudster is attempting multiple transactions. Then merchant should check subsequent transactions for any signs of fraud.

Issuing bank

Card issuing banks are responsible for ensuring safe and transparent online payment environment. Their goal in the payment processing flow is to ensure that cardholder acts within their rights and that their rights remain intact. Issuing bank connects merchant and cardholder’s bank account, thus they check the payment elements related to both merchant and cardholder.

Issuing bank is likely to fail a transaction if there are any uncertainties or possible signs of fraud. For example, Issuing bank is the one responsible for declining a transaction if there are insufficient funds in 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.

Issuing bank also has fraud prevention policies. If there are signs that a transaction might be fraudulent – 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 merchant or website (based on Merchant Category Code or issuer’s acceptance policy). In addition, there might be other reasons why issuing bank would decline a transaction. For example, unspecified reasons or connection errors. In such case, you should contact the bank to learn more why the transaction has failed.

Acquirer

Rarely do error codes occur due to acquirer. When an acquirer accepts a merchant for payments, they are sure that merchant is eligible to process payments. However, similarly to Issuing bank, acquirer is responsible for online payment ecosystem.

For example, acquirers usually have rules configured to fight fraud. If transaction do not comply with the rule – it might be declined. In addition, acquirer might sometimes face technical difficulties that would prevent a transaction to be processed successfully.

Acquirer is in merchant side of the field. If you receive errors that are strange and stands out from the issuing bank or cardholder errors (as mentioned, they are usually similar), contact your acquirer immediately.