For large enterprises, the cost of payment declines extends beyond lost sales. Not only must merchants spend additional funds to recapture abandoned carts, but excessive retries may also lead to hefty fines imposed by credit card processors and networks.
With declined card payments comprising 5% to 10% of all transactions,1 improving authorization rates becomes a critical balancing act of preventing fraudulent payments while still maximizing legitimate approvals.
The decision to retry a transaction is often driven by the potential to capture sales that might otherwise be lost – after all, 44% of consumers give up on a purchase after experiencing a decline.1
Successful retries, which usually occur in situations that can easily be resolved, allow merchants to recover these abandoned carts and boost revenue. Customers may also feel greater satisfaction, as they don’t need to re-enter their payment information or seek alternative sites for their purchases. There may be a benefit to retrying a card, especially when it comes to recurring payments for subscription-based services or products, where a customer is not even present to retry with an alternate payment method.
That said, card networks strive to keep their systems as efficient as possible. Merchants who excessively retry transactions can drastically impact network bandwidth. To mitigate this, many networks have imposed penalties on businesses for over-retrying transactions – on average, merchants pay $12.10 in fees per rejected or retried payment.2
Beyond financial penalties, excessive retries can also lead to:
With credit cards being the second most popular online payment method globally,3 decoding the underlying reasons for transaction declines may allow businesses to make more informed decisions.
Credit card decline codes offer insights into why a transaction was declined. Some common codes include:
Whether the next steps involve retrying transactions, recommending alternative payment methods, or taking steps to address the root cause, businesses can be better equipped to avoid retry penalties, reduce fraud, and minimize card processing fees.
A hard decline occurs when a transaction cannot be processed due to permanent reasons, such as a closed account or an expired card. Attempting to retry a hard decline is usually futile and can lead to customer frustration or increased scrutiny by card issuers.
Comparatively, soft declines – often resulting from temporary issues such as insufficient funds or bank outages – can typically be resolved with a successful retry after a short wait.
Visa categorizes declined transactions to help merchants discern the reasons behind them and gauge the feasibility of a retry.
These categories include:
While some declines can be retried, others should not be. For every retry above Visa’s threshold, merchants will need to pay between $0.10 and $0.15 in fees.4
Similarly, Mastercard enforces retry penalties for excessive authorization attempts. For instance, the 'MC TPE EXCESSIVE AUTH' fee, part of the Mastercard Transaction Processing Excellence program, is levied on merchants who continue seeking authorizations after an account number has already been declined by the issuer ten times within 24 hours.
This fee, set at $0.15, is designed to discourage redundant authorization attempts and maintain the integrity of the payment network.5
The ideal timing for retries varies depending on the reason for the decline. Immediate retries may be effective for short-lived technical issues, while waiting a few hours could address temporary financial issues like insufficient funds.
By assessing the best moment to reprocess a failed transaction based on the type of decline, time-based retries are a sophisticated strategy for managing declined transactions. Its benefits include recovering sales that might otherwise be lost due to temporary issues, like network outages or processing errors. However, the drawbacks are just as important to consider – too many attempts can irritate customers and lead to additional fees.
Regardless of whether you leverage sophisticated machine learning tools or basic retry strategies, it’s essential to keep customers informed about declines and retries. Prompt and transparent communication about transaction issues and remedial actions – whether through email, SMS, or in-app messages – sets customer expectations, maintains trust, and mitigates potential inconvenience.
Manually monitoring payment authorization can be time-consuming and costly. By optimizing payment retries in the background, merchants can focus on core business activities.
When choosing a solution, consider features such as:
PayPal Braintree's Smart Retries solution powers time-based retries with machine learning. It analyzes vast amounts of transaction data to make dynamic decisions on when and how to retry failed transactions most effectively, ultimately increasing the chances of approval without manual intervention.
Advanced retry strategies may bring numerous benefits, including:
Striving for platform efficiency in implementing an improved retry strategy ultimately leads to reduced risk while maximizing opportunities for upside.
With the government reporting an estimated $247 billion in payment errors in 2022,7 the urgency for merchants to optimize their transaction handling processes cannot be overstated.
Rather than blindly retrying declined transactions, merchants should prioritize a strategic approach and explore intelligent retry solutions, such as PayPal Braintree. PayPal Braintree's optimized processing capabilities may not only enhance the likelihood of successful transactions but may also significantly reduce the operational burden, allowing enterprises to focus on growth and customer satisfaction.
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