After the Covid-19 pandemic, the use of online transactions has been at its peak. Most people do not deal in cash and carry on their transactions through online payment systems. Nowadays, people use UPI Autopay to pay their mobile bills, credit card bills, electricity bills, and other expenses. However, while making a payment online, many factors go into making the process possible, and a single error in any of the methods can result in a failed transaction. The data referring to a single transaction goes through a series of events before it reaches its final destination. These events can vary from gateway to gateway, as each one has its security measures in place. However, looking at a typical data flow, one can consider the following as a primary example- Initiator > payment gateway > issuing bank > acquiring bank.
When applying coupons or card-related discounts, the data flow can have additional steps that take into account the variations and occur accordingly. One such security measure is the usage of an OTP, which authenticate the payment and ensure that the user initiating the amount is, indeed, the person who owns the card; once that is cleared, the amount is created and debited from your account.
Why Do Online Payments Fail?
When the consumer initiates an online transaction, the payment gateway route to and from the payment processor. After getting fraud checks, and 3D Secure confirmation, the card data is sent to the acquiring bank. Later, the acquiring bank safely sends the payment information to the card schemes, also called card networks. After another security check, the payment is sent to the issuing bank, where it is either approved or rejected. Then a message is sent to the acquirer, and the approved or rejected payment message is sent to the merchant. All these steps happen within a few seconds.
What are the various types of payment failures?
Payment failures can be specified into different types depending on the situation. Below are a few types of online transactions failed reasons–
Online payment failure from the consumer's end-
These types of errors can occur when a customer needs to provide the correct card details, the wrong OTP, or they have an insufficient amount in their account. It can be considered an incomplete payment.
Online payment failure from the merchant's side-
This kind of failure can happen when there is a technical or security error that the merchant is responsible for.
Online payment failure because of a data transfer error-
It can occur when the customer receives an online payment failure message, but the payment works through, so the cardholder’s amount gets debited.
Online payment failure when the payment is not charged-
The payment failed because the customer’s account needed to be debited.
What Causes Online Payment Failure?
Numerous factors can contribute to online payment failure; till now, we have discussed that payment failure can be from both the merchant and customer sides. If we talk about the customer’s side, the loss can be caused if the customer provides incorrect details or has an insufficient bank balance. On the other side, from the merchant’s side, the failure reasons can be complex, which makes it essential to understand the logic in detail.
The reasons for online payment failure from the merchant’s end are mentioned below.
System timeout-
The elements involved in the online payment transaction process include the payment gateway, processor, acquiring bank, and issuing bank. Due to some issues, these elements experience downtime. However, the server cannot get approval if these elements experience downtime during an ongoing transaction. The transaction cannot be completed when it happens and displays a payment failure.
Payment technology fails-
As you all know, payment processing includes many factors to debit the payment from the customer’s account and credit it to the merchant’s account. When the customer initiates the payment process, they need to select a payment method, and after choosing the payment option, they need to mention payment information. After that, the payment data is sent to the payment gateway to transfer to the card network. After the information is checked and the transaction is approved, the amount is sent to the recipient and moved to the merchant’s account.
However, online payment failure can occur if a slight loss happens during any of the above-discussed steps in the payment process.
Security Concerns-
Everyone involved in online payment processing must uphold the security requirements to detect and avoid online payment fraud. Banks, including issuers, are equipped with advanced technology that detects and analyzes copy. These fraud tools verify and examine if the online transactions are authenticated depending on previous spending standards. If something seems missing, the transaction is blocked and declined. Some common indications cause transactions to be stopped-
The bank identification number is blocked-
A transaction can be denied if the card’s bank identification number is blocked. Then the system uses filters to search for customers who are not trustworthy. It is, moreover, blacklisting records and tracks cardholders who show inconsistent activity.
The maximum transaction limit is surpassed-
Some merchants set a maximum transaction amount; if the limit is exceeded, the transaction can be a payment gateway error.
There is a security threat-
Unusual activity from the issuing bank’s side that harms security can result in a blocked or declined transaction.
Tips To Reduce Online Payment Failure:
Online payment failures are impending in the ecommerce business, but using a secure payment service provider with advanced functions that allow you to accept different payment methods can help you reduce failed online payments.
Use a payment gateway that allows transactions to multiple payment processors-
During the payment process, transactions get sent to different parties, including the payment processor. If your payment gateway only allows you to link payments to one processor, there is a higher possibility of experiencing system downtimes and failed costs. You must use payment orchestration to send transactions to multiple payment processors. So that if one is down, your customers won’t receive a payment failure message.
Find an ecommerce payment platform with advanced functionalities-
Choosing a primary digital payment feature may be challenging as the business grows. Payment processing may happen in seconds, but the work behind the scenes is complex. This is why you must select a platform offering additional features and functions.
Prioritize online payment security-
Following online payment security regulations protects your customers and business from fraudsters and other security risks. But it is necessary to know what steps to take to become a complaint when developing a brand. Choose a payment platform that is PCI DSS Level 1 compliant.
Accept a wide range of online payment methods-
Using a payment gateway that helps you accept comprehensive payment methods is an excellent way to reach out to more customers worldwide. Try to look for a platform aggregating all major, alternative, and local payment methods in a single payment platform.
Final Thoughts:
Although it is impossible to avoid payment failures altogether, you must understand why they happen and what precautions you can take to prevent them to a certain extent. It will also help make the payment process more accessible and transparent for customers. Also, you can avoid failed transactions occurring due to customer mistakes. Please find this blog informative.