Recovering Declined Payments: The Third Component of a Future-Conscious Payment StrategyComplex Merchant Profiles

Recovering Declined Payments: The Third Component of a Future-Conscious Payment Strategy


Last Updated on March 22, 2024

Ensuring your business is prepared for the future should always be a top priority. This means having multiple layers of defense in place to protect against economic disruption. One critical — but often overlooked — component of any organization’s overall payment strategy is decline recovery.

A well-designed recovery strategy can help mitigate losses due to payment declines, increase your authorization rates, and significantly enhance your bottom line. In this blog post, we’ll cover the fundamentals of what decline recovery is and how you can use it to create a sustainable payment strategy.

The Impact of Payment Declines

A payment decline is when a financial transaction is declined by the credit card issuer or payment network. It’s a frustrating experience for both the customer and the merchant. Unfortunately, they are all too common. A CMSPI study reports that merchants lose over $230 billion annually due to declined transactions.

Frequent declined payments can also increase your operational costs. You may need to allocate additional resources to handle customer complaints and refunds, affecting your business’s overall efficiency and profitability.

Declines don’t just result in lost revenue, they can also damage your brand’s reputation and customer trust. When a customer’s payment is declined, especially without a clear reason, they might associate the negative experience with your brand. This can lead to reduced customer loyalty, lower customer lifetime value, and ultimately, hinder your business growth.

Payment declines happen due to a plethora of reasons, including the following:

  • insufficient funds
  • exceeded credit limits
  • incorrect card details
  • technical issues
  • suspected fraud
  • internal policies for the customer’s bank

The trick to minimizing declines lies in understanding their root cause and implementing a proactive recovery strategy.

The Art of Recovery: Increasing Authorization Rates

A strategic approach to recovery can drastically boost your authorization rates. The key lies in intelligent transaction routing, data-driven understanding of decline patterns, and leveraging technologies that retry failed transactions.

Intelligent transaction routing is a process where transactions are directed through the path most likely to result in successful authorization. It could mean routing transactions based on the card type, the issuing bank, or the geographical location. By doing so, you can significantly reduce payment declines, thus improving your authorization rates and customer experience.

Analyzing your transaction data to understand decline patterns can also be instrumental in shaping your recovery strategy. For instance, if you notice a higher decline rate for a particular card type or issuing bank, you can take specific measures like contacting the bank or advising your customers to use a different payment method.

FlexPay: Revolutionizing Payment Recovery

One of the key partners you can leverage in your recovery journey is FlexPay. FlexPay uses AI and machine learning to analyze why transactions are declined. It then determines the optimal time and method to retry these transactions, significantly improving the chances of their approval.

Not just recovering lost sales, FlexPay also offers valuable insights about your transactions, helping you optimize your payment strategy. By identifying patterns in declines, it enables you to refine your strategy to avoid such instances in the future, further boosting your authorization rates.

The Need for a Proactive Recovery Strategy

An effective recovery strategy is not an afterthought, but a fundamental part of a future-conscious payment strategy. As your business expands and your payment processing becomes more complex, a robust recovery strategy can be the deciding factor between stagnation and growth.

Besides, a well-executed recovery strategy can improve your customer experience. By minimizing payment declines, you ensure a smooth checkout process for your customers, leading to increased satisfaction and loyalty.

Final Thoughts

We hope this post has provided you with a wealth of information and valuable insights into the recovery aspects of a future-focused payment strategy. With these strategies in place, companies can reduce losses due to authorization declines, protect customer experience, and boost revenues. But remember there is still more work left to be done in achieving a seamless payments strategy.

For more helpful tips about how you can reach optimal payment success, contact Nexio and speak to one of our experts today. At Nexio, we are committed to working with our clients to navigate any payment-related challenges they may encounter throughout the lifetime of their business. End each day knowing that you are taking steps toward your dream of building a successful future-focused payment strategy for your business — and beyond!

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