Declined card payments: How they affect e-commerce business

A customer adds items to their cart, then is ready to proceed to the checkout. When they click on ‘pay’, however, the payment doesn’t go through. Declined card payments can happen for a variety of reasons. No business owner wants to lose out on funds due to a card that won’t go through. But why do declined card payments happen, and how can they be avoided?

In the European Economic Area alone, failed payments are estimated to cost more than $40 billion per year in fees, labor and lost business.

This guide will tell you all you need to know about types of declined card payments, what can be done about them and how to ensure your payment process goes smoothly. As a result, businesses can be better informed about reducing the risk of declined payments and the resulting lost customers and revenue.

What are the types of card declines?

To understand why cards are declined, it’s important to establish the two forms of decline a customer may see when a payment is rejected.

The types of card declines include soft declines and hard declines.

• Soft decline: typically temporary, these delinces are the result of insufficient funds or technical difficulties with network connectivity. You can retry the transaction and see whether it will be put through, but it’s not advisable to try multiple times.
• Hard decline: this type of decline is due to a security issue that can’t be solved by retrying the transaction. The customer’s bank or card issuer will not authorise the transaction. Reasons for this include suspected fraud, a lost or stolen card and invalid account information. The customer’s only option is to contact the financial institution.

Why is it important to be aware of declined card payments?

Though businesses are well aware that declined card payments occur, it’s important to consider why they’re happening. The first consideration is how frustrated the potential customer is when a payment is rejected. It can certainly prevent them from wanting to try to put the payment through again.

Then, the business has lost a sale, and getting a customer to the point of checking out takes a great deal of money and work. A business's reputation can take a hit. It’s difficult to win new customers over, too – a business pays five times more to attract new customers than to keep their existing ones! It is well worth time spent to research alternative payment options.

Common reasons why card payments are declined

It is worth exploring the common reasons card payments get declined. There is often an error message shown with the declined payment that will give an idea of the reason behind the failure. In many cases, however, the message can only be seen by the customer, not the business owner, to preserve the customer’s confidentiality between them and their bank.

Another reason these decline messages aren’t always so clear? Fraudulent transactions. If a fraudster attempts to purchase an item with a stolen card, the decline message may have details that allow them to find a way around the fraud check. By not giving too much information about a rejected transaction, the card issuer is attempting to protect the consumer.

Listed below are the most common reasons for declined transactions.

Cross-border payments

In today’s globalised society, it’s commonplace to purchase goods or services online from a company located in another country. A business and consumer being in different countries means a more complex processing of a card payment. Some card schemes offer a guarantee of seamless transactions across borders, while others do not.

Insufficient funds

The customer may not have the available credit or funds to complete the purchase. In that case, the issuing bank or financial institution will reject the request for any payment to be made. The customer would need to provide an alternative payment method.

Suspected fraud

Online payment fraud occurs more than most may realise, costing an estimated $20 billion in 2021 alone. Any card issuer must be vigilant to any suspicious activity. Some genuine payments, however, can be rejected because they’re mistakenly identified as fraud.

With strong customer authentication (SCA) required in the EU, it’s easier to identify a genuine transaction and tougher for fraudsters to take advantage of vulnerable information.

Incorrect card details

Card numbers run long, making it understandable that a customer enters the card details incorrectly. They may also misspell their name or fill in an incorrect card issue or expiry date.

Expired, lost or stolen cards

The typical period of validity on a card is about 36 months. If a customer stores card information online to make payments easier, they may forget to update their card details when a card has expired.

A customer can easily become frustrated at the checkout process not realising their stored card details have expired, leading to an abandoned cart. Some card issuers, however, will automatically sync cards held on file by a business.

Card limits

A card may have limits on how many transactions can be processed during a given period, resulting in a payment rejection after the limit has been reached. Furthermore, certain cards may have amount limits that can be used for international or online orders. When reached, subsequent transactions will be rejected.

How to prevent failed card payments in e-commerce

There is much a business owner can do to ensure that failed card payments do not affect their business:

• Choose more resilient payment options, such as account-to-account payments. Consumers want different options to choose from when it comes to payment, and not having those available means they may seek out one of your competitors. 
• Consider allowing card details to be saved in the customer’s account. When the card details don’t have to be re-entered, there is less room for error in inputting the card information.
• Recharge the customer. If the rejection was a soft decline, the payment may go through successfully when tried a second time.

kevin. understands that a business can’t afford to have a customer’s payment be rejected. Not only have you lost a sale, but you’ve also ensured a customer likely won’t return to try purchasing again in the future.

A2A payments - the solution to declined card tansactions

When you cut out the need for a card, it means there is no chance of card fraud occurring. Account-to-account (A2A) payments occur directly from a customer bank account to the merchant’s bank account. That protects against card fraud as well as meaning merchants don't pay as much as they would for traditional card processing fees.

With A2A payments, two-factor authentication is an embedded part of the process, so the entire payment process is more secure.

Security, flexibility and broad coverage are some of the main reasons that businesses are choosing to work with kevin., ensuring they can enjoy greater profits without the headaches of unnecessarily rejected payments.