Understanding and Preventing Payment Failure

Table of Contents

1. What is a payment failure?
2. How can merchants identify a payment failure?
3. What are the reasons that payments fail?
4. How can merchants prevent payment failure?
5. Transforming payment failures into opportunities

Key Takeaways

• Payment failures occur when transactions fail to transfer funds successfully due to various issues or fraud prevention measures.
• Merchants can detect payment failures through notifications, error codes, history, feedback, dashboards, fraud systems, and chargeback alerts.
• Common error messages, like "Your card has been declined" or "Invalid expiration date," indicate specific reasons for payment failures, helping merchants address issues quickly.
• Payment failures can happen due to unsupported methods, insufficient funds, or technical issues.
• Merchants can reduce payment failures by notifying customers, automating emails, and scheduling retries.

Every digital transaction is a promise—an agreement between buyer and seller that goods, services, or invoices will be settled seamlessly. However, when a payment fails, that promise unravels, leading to missed opportunities, potential cash flow setbacks, and strained customer relationships.

Failed payments can stem from various factors, each posing a unique challenge, from a credit card's expiration to a simple connectivity hiccup. In this guide, we’ll walk through the primary causes behind payment failures and explore actionable steps to minimize them, from dunning emails to automated retry schedules.

Ready to reduce disruptions in your digital payment processes? Keep reading to discover practical solutions.

What is a Payment Failure?

A payment failure happens when a payment doesn’t successfully transfer from one party to another. Failures can result from various issues—some prevent legitimate transactions, while others serve to protect against fraudulent activity.

How Can Merchants Identify a Payment Failure?

Merchants can identify payment failures through various methods and indicators. Here's how they can do it:

1. Real-time notifications: Merchants can integrate with payment processors for real-time transaction status notifications via email, SMS, or webhook, promptly resolving payment issues.

2. Error codes and messages: Payment gateways can display error codes for failed transactions. This information helps merchants identify the cause of the failure, such as insufficient funds or invalid card details.

3. Transaction history and reports: Merchants can analyze transaction reports to track failed payments and identify patterns or issues for attention.

4. Customer feedback: Customers can report payment failures to merchants. Merchants should listen and fix any issues. This feedback helps merchants improve their payment processes.

5. Payment gateway dashboard: Payment gateways offer merchant dashboards for centralized transaction data monitoring, payment trend analysis, failed payment identification, and payment processing troubleshooting.

6. Fraud detection systems: Merchants can use fraud detection systems to identify suspicious transactions and prevent payment failures.

7. Chargeback notifications: Chargebacks notify merchants of disputed transactions. Promptly handling them minimizes financial losses and protects reputation.

By leveraging these methods and indicators, merchants can effectively identify payment failures, understand their causes, and take appropriate actions to minimize their impact on business operations and customer satisfaction.

What Are Some Common Payment Failure Error Messages?

When making an online purchase, it is common to encounter payment failure error messages. These messages can be frustrating, but they often provide valuable information about the cause of the problem. Here are some of the most common payment failure error messages and what they mean:

• “Your card has been declined": Credit or debit card rejected by the issuing bank due to insufficient funds, expiration, reported loss/theft, or account hold.
• "Invalid card number": The credit or debit card number is incorrect. Check for typos or spaces.
• "Invalid expiration date": Incorrect credit or debit card expiration date. Check the date format (MM/YY or MM/YYYY).
• "CVV code is incorrect": The CVV is used to verify that you are the authorized cardholder. If it is incorrect, you will receive a payment failure error message.
• "Your address does not match the address on your credit card": If you recently moved or are using a different address for billing purposes, the billing address you entered won’t match the address on file with the issuing bank.
• "Your transaction has been flagged for review": Your credit or debit card issuer has flagged your transaction due to factors like an unusually large amount, a new device, or a foreign country. Contact the issuer to verify your identity and complete the transaction.
• "The merchant has declined your payment": The merchant declined due to card type, card information, or technical issues. Contact the merchant for resolution.

What Are the Reasons that Payments Fail?

• Unsupported payment method: The payment won't go through if the merchant doesn’t accept a customer’s chosen payment method (e.g., specific credit cards).
• Insufficient funds: Payments will fail if the customer lacks enough money or available credit to cover the transaction.
• Expired card: Payments won’t process if the customer’s credit card has expired.
• Data Mismatch: The payment will be blocked if the cardholder’s details don’t match those on file with the issuing bank.
• The transaction exceeds the single charge limit: Some accounts have limits on single transactions. If a purchase exceeds this limit, it will fail, even if funds are available.
• Unstable internet connection: A stable connection is crucial for online payments. An unstable connection can lead to failed transactions, which can cause frustration.
• System downtime or maintenance: Scheduled updates or repairs to payment systems can temporarily block transactions.
• Suspicion of fraud: Issuing banks may block payments that deviate from a customer’s typical spending habits or if they detect unusual activity.
• International payment issues: Payments made from locations outside a customer’s usual area might be flagged. Additionally, some credit cards don’t support global transactions.
• 3DS2 friction: This multifactor authentication protocol can add friction by requiring additional verification for transactions that appear risky. The transaction will fail if customers can’t or won’t provide this information.

How Can Merchants Prevent Payment Failure?

Merchants can’t control certain factors like insufficient funds or customer connectivity issues. However, they can implement strategies to reduce and recover failed payments:

• Notify customers of failed payments: Customers may not realize a payment attempt failed. Sending a notification with a clear call-to-action allows them to resolve the issue promptly.
• Automate dunning emails: Automating the dunning process (i.e., reminders for outstanding payments) helps merchants remind customers to complete payments. Automated dunning can include recurring emails that offer instructions to address payment issues.
• Schedule payment retries: Automatic retry cycles increase the chances of successful processing once funds are available for payments that fail due to insufficient funds.

Transforming Payment Failures into Opportunities

Payment failures may be inevitable, but merchants can convert these setbacks into streamlined customer experiences with the right tools. From using automated dunning emails to optimizing retry schedules, proactive approaches can vastly improve payment success rates.

Paystand’s innovative B2B Payments Network is built to simplify and secure digital payments for businesses, reducing the impact of failures on cash flow and customer satisfaction. By leveraging Paystand’s solutions, your company can avoid payment pitfalls and maintain consistent, reliable transactions.

Want to learn more about preventing payment interruptions in your supply chain? Download our comprehensive eBook on digital payments today.