Businesses suffer because of the failure of online payments.
Online merchants lose up to 62% of customers who experience a failed transaction every time a customer tries to purchase products and services from your site.
Then when they go to the checkout page, fill in their card details and when they click pay, they are asked to try again. Most customers will leave the transaction although it will not take long for them to go through the payment flow.
Digital payments are the most preferred way to make and receive payments. As a merchant, online payment failure is a problem that you should not ignore. Doing so can lead to more abandoned carts, revenue loss and poor customer experience.
What does the payment process look like?
When customers visit your site and begin the payment process, the payment gateway provides routes to and from your payment processor. After running a general fraud check and verifying 3D security, the card information is sent to the recipient bank, also referred to as your merchant acquirer. The acquiring bank then 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 be approved or rejected. The approved or disapproved payment message is then sent to the merchant. This whole process takes less than a second.
Type of payment failure
Payment failures are categorized into different categories depending on the situation.
Failure on the part of the customer – This type of error occurs when the customer provides incorrect card information, insufficient funds or incorrect one-time password (OTP).
Failure on the part of the trader When there is a security or technical flaw for which the trader is responsible.
Failure when a data transfer error Happens – This usually happens when the customer receives a payment failure text, but the payment is eventually made. In this case, the customer’s account will be debited.
Failure when the amount is not charged – Payment failed and customer account not debited.
The reason for the failure of online payment from the merchant
Merchant’s reasons for online payment failure are more complex, and we need to cover this in detail. Here are the main reasons for the failure of online payment by the merchant
Key players involved in the payment process include payment processors, payment gateways, issuing banks and acquiring banks. Whether planned or not, these cash flow players can experience system downtime.
If a named party in the online payment process experiences downtime when a customer makes a purchase, the server may get approval for the transaction. When this happens, the transaction will not be completed and it will be registered as an online payment failure.
Payment technical failure
When customers are on the checkout page, they have to choose the payment method of their choice, credit card or any other payment method. After selecting the payment method, they need to fill in their payment details to start the payment process. It takes a few steps to transfer money from the customer’s account to the merchant’s account.
Customer data and payment details are then sent to the payment gateway for transfer to the card network. After verification of details and approved transactions, the cash is sent to the acquirer and then transferred to the merchant’s account.
If any of the steps mentioned above have a technical problem, an online payment will fail.
If security is compromised
Detecting online payment fraud is an endless battle fought by almost all the key players involved in online payment processing.
Banks, for example, issuing banks, are equipped with advanced anti-fraud tools. These tools analyze and verify whether transactions are authenticated If anti-fraud tools identify something wrong or suspicious in the payment process, they may reject the transaction. Some red flags that could reject anti-counterfeiting equipment transactions;
- Security threats are coming from the issuing bank
- Several merchants have an upper limit on the transaction and if the transaction limit is exceeded, the payment may be refused.
- There is a black list of bank identification numbers. When a transaction is initiated with a blacklisted BIN number, it is automatically rejected.
There are other common causes of online payment failure
- Expired card
- Incorrect configuration of payment gateway
- Transactions blocked by merchant account
- Canceled card
- The payment method chosen by the customer 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
- Transactions received through a suspended or closed account
Tips to help reduce online payment failures
Online payment failure occurs all the time in e-commerce business; However, there are some precautions you can take to reduce the failure rate of online payments, including;
1. Use a payment gateway that routes payments through multiple payment processors.
When a customer pays for something, the details of the transaction are sent to various parties, including the payment processor. If the payment gateway you use only allows payments to be sent to one payment processor, then there is a high probability of payment failure or downtime.
2. Find an ecommerce payment platform with advanced features
Your online business is growing every day and this will create more demand on your payment processing platform. If you choose basic payment features, it may not be sustainable to grow your business.
So make sure you find a payment processor that can manage the growth of your business and allow you to scale and process many transactions without technical failure or system crash.
3. Optimize your security
Ensuring you comply with payment security rules protects your business and your customers from fraud and other online scammers.
Make sure your business is PCI compliant to make sure you have no problems processing payments.
4. Accept many payment methods.
Using a payment gateway that allows you to adopt a myriad of payment methods is a sure way to reach more customers and increase sales.