6 Reasons for Payment Declines and What to Do About Them

By Brandon Banks

Payment processing declines are a frustrating and costly aspect of running a business, particularly if you operate both domestically and internationally. Minimizing the impact of declines on your business requires understanding why declines happen, interpreting decline reason codes, and implementing strategies and tools to prevent them. In this article, we will explore the world of payment declines, discuss common decline reason codes, and share technologies, services, and products that can help reduce or prevent declines.

Reasons for Payment Declines

Payment declines can occur for various reasons, including the following:

1. Insufficient funds — If a customer’s account lacks sufficient funds to cover the transaction, the payment will be declined.
2. Expired card — Payments made with expired credit or debit cards will be declined.
3. Incorrect card information — Entering inaccurate card information, like card number, expiration date, or CVV, can result in a declined payment.
4. Fraud suspicion — Banks and payment processors may decline transactions if they suspect fraud or deem the transaction risky.
5. Card issuer restrictions — Some card issuers impose restrictions on specific transactions or merchants, leading to declined payments.
6. Technical issues — Occasionally, technical problems with payment gateways, processors, or the card issuer’s systems can cause transaction declines.

Decoding Decline Reason Codes

When a payment is declined, businesses usually receive a decline reason code from the payment processor. These codes help identify the decline’s cause, allowing businesses to address the issue and prevent future declines. Common decline reason codes include the following:

• 05 – Do not honor — The issuing bank has chosen not to authorize the transaction.
• 14 – Invalid card number — The entered card number is incorrect.
• 51 – Insufficient funds — The customer’s account does not have enough funds to cover the transaction.
• 54 – Expired card — The card’s expiration date has passed.
• 62 – Restricted card — The card has usage restrictions that prevent the transaction from being approved.
• 91 – Issuer unavailable — The card issuer’s system is temporarily down or unreachable.

Best Practices for Preventing Payment Declines

To reduce payment declines, businesses can follow several best practices:

1. Verify customer information — Implement address verification systems (AVS) and card verification value (CVV) checks to confirm customer identity and ensure accurate card information.
2. Set up fraud prevention tools — Use fraud detection software and services like 3D Secure to identify and block suspicious transactions before processing.
3. Stay current on industry regulations — Ensure your business complies with the latest payment processing regulations, such as PCI-DSS, to minimize declined transactions due to non-compliance.
4. Keep communication lines open — Encourage customers to update their payment information, including card expiration dates and billing addresses, to prevent declines due to outdated information.
5. Maintain good relationships with payment processors — Collaborate closely with your payment processor to address any issues that may arise and ensure smooth payment processing.

Technologies, Services, and Products to Minimize Declines

Several solutions can help merchants prevent or reduce payment declines, including the following:

• Tokenization — This technology replaces sensitive card data with a unique identifier or token, decreasing the risk of data breaches and the subsequent impact on transaction approvals.
• Machine learning-based fraud detection — Advanced fraud detection systems use machine learning to analyze transaction data and identify patterns indicative of fraud, enabling merchants to block suspicious transactions before processing.
• Dynamic 3D Secure — This updated version of 3D Secure adjusts the required authentication level based on the transaction’s risk level, reducing friction for legitimate customers while maintaining robust security measures for high-risk transactions.
• Payment gateway optimization — Choose a payment gateway with a high success rate and a wide range of supported payment methods to help reduce declines. Additionally, consider using multiple payment gateways to route transactions through the most suitable processor based on factors such as location, currency, and transaction type.
• Account updater services —These services automatically update customers’ credit card information, such as new card numbers and expiration dates, reducing the likelihood of declines due to outdated data.

Final Thoughts

Payment declines, while a nuisance for many businesses, can be managed and contained with proactive strategies. As we’ve discussed in this blog post, understanding the common causes of payment declines, interpreting decline reason codes, implementing best practices and leveraging technologically advanced services and products are all great ways to reduce the number of declined payments. Doing these things can help protect businesses from losses, improve customer trust in the brand, and enhance their overall customer experience.

The good news is that businesses don’t have to navigate changing rules and regulations on their own. Nexio has developed reliable solutions to match each business’s unique needs. As a comprehensive payment solution provider, Nexio offers features tailored to scale with your business at every stage of your journey. Take a full advantage of Nexio’s range of expertise by contacting us today!